VI.
CONSUMATION
Effects of the Contract When the Thing Sold Has Been Lost
Article 1493. If at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the contract
shall be without any effect.
But if the thing should have been lost in part only, the vendee may
choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed
upon. (1460a)
Article 1494. Where the parties purport a sale of specific goods, and
the goods without the knowledge of the seller have perished in part or
have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat the
sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay the
agreed price for the goods in which the ownership will pass,
if the sale was divisible. (n)
CHAPTER
Obligations of the Vendor
SECTION
General Provisions
Article 1495. The vendor is bound to transfer the ownership of and
deliver, as well as warrant the thing which is the object of the sale.
(1461a)
Article 1496. The ownership of the thing sold is acquired by the vendee
from the moment it is delivered to him in any of the ways specified in
articles 1497 to 1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the vendee. (n)
SECTION
Delivery of the Thing Sold
Article 1497. The thing sold shall be understood as delivered, when it
is placed in the control and possession of the vendee. (1462a)
Article 1498. When the sale is made through a public instrument, the
execution thereof shall be equivalent to the delivery of the thing which
is the object of the contract, if from the deed the contrary does not
appear or cannot clearly be inferred.
With regard to movable property, its delivery may also be made by the
delivery of the keys of the place or depository where it is stored or kept.
(1463a)
Article 1499. The delivery of movable property may likewise be made
by the mere consent or agreement of the contracting parties, if the thing
sold cannot be transferred to the possession of the vendee at the time
of the sale, or if the latter already had it in his possession for any other
reason. (1463a)
Article 1500. There may also be tradition constitutum possessorium.
(n)
Article 1501. With respect to incorporeal property, the provisions of
the first paragraph of article 1498 shall govern. In any other case
wherein said provisions are not applicable, the placing of the titles of
ownership in the possession of the vendee or the use by the vendee of
his rights, with the vendor's consent, shall be understood as a delivery.
(1464)
Article 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of paying
the price, the ownership passes to the buyer on delivery, but he may
revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract, or, if no time has been fixed, within
a reasonable time. (n)
When goods are delivered to the buyer on approval or on trial or on
satisfaction, or other similar terms, the ownership therein passes to the
buyer:
(1) When he signifies his approval or acceptance to the seller
or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of rejection,
then if a time has been fixed for the return of the goods, on
the expiration of such time, and, if no time has been fixed, on
the expiration of a reasonable time. What is a reasonable time
is a question of fact. (n)
Article 1503. When there is a contract of sale of specific goods, the
seller may, by the terms of the contract, reserve the right of possession
or ownership in the goods until certain conditions have been fulfilled.
The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or
other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller or of
4 his agent, the seller thereby reserves the ownership in the goods. But,
if except for the form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the seller's property in
the goods shall be deemed to be only for the purpose of securing
1 performance by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession of the
bill of lading is retained by the seller or his agent, the seller thereby
reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits
the bill of exchange and bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor the bill of exchange, and if
he wrongfully retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that the goods are
2 deliverable to the buyer or to the order of the buyer, or is indorsed in
blank, or to the buyer by the consignee named therein, one who
purchases in good faith, for value, the bill of lading, or goods from the
buyer will obtain the ownership in the goods, although the bill of
exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the transfer
wrongful. (n)
Article 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the
time of such delivery;
(2) Where actual delivery has been delayed through the fault
of either the buyer or seller the goods are at the risk of the
party in fault. (n)
Article 1505. Subject to the provisions of this Title, where goods are
sold by a person who is not the owner thereof, and who does not sell
them under authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
 (1) The provisions of any factors' act, recording laws, or any
other provision of law enabling the apparent owner of goods
to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power
of sale or under the order of a court of competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and
special laws. (n)
Article 1506. Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith,
for value, and without notice of the seller's defect of title. (n)
AND PERFORMANCE OF CONTRACT
Article 1536. The vendor is not bound to deliver the thing sold in case
the vendee should lose the right to make use of the terms as provided
in article 1198. (1467a)
Article 1537. The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they were upon the
perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the
contract was perfected. (1468a)
Article 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in article 1189 shall be observed, the vendor
being considered the debtor. (n)
Article 1539. The obligation to deliver the thing sold includes that of
placing in the control of the vendee all that is mentioned in the contract,
in conformity with the following rules:
If the sale of real estate should be made with a statement of its area, at
the rate of a certain price for a unit of measure or number, the vendor
shall be obliged to deliver to the vendee, if the latter should demand it,
all that may have been stated in the contract; but, should this be not
possible, the vendee may choose between a proportional reduction of
the price and the rescission of the contract, provided that, in the latter
case, the lack in the area be not less than one-tenth of that stated.
The same shall be done, even when the area is the same, if any part of
the immovable is not of the quality specified in the contract.
The rescission, in this case, shall only take place at the will of the
vendee, when the inferior value of the thing sold exceeds one-tenth of
the price agreed upon.
Nevertheless, if the vendee would not have bought the immovable had
he known of its smaller area of inferior quality, he may rescind the sale.
(1469a)
Article 1540. If, in the case of the preceding article, there is a greater
area or number in the immovable than that stated in the contract, the
vendee may accept the area included in the contract and reject the rest.
If he accepts the whole area, he must pay for the same at the contract
rate. (1470a)
Article 1541. The provisions of the two preceding articles shall apply
to judicial sales. (n)
Article 1542. In the sale of real estate, made for a lump sum and not
at the rate of a certain sum for a unit of measure or number, there shall
be no increase or decrease of the price, although there be a greater or
less area or number than that stated in the contract.
The same rule shall be applied when two or more immovables as sold
for a single price; but if, besides mentioning the boundaries, which is
indispensable in every conveyance of real estate, its area or number
should be designated in the contract, the vendor shall be bound to
deliver all that is included within said boundaries, even when it exceeds
the area or number specified in the contract; and, should he not be able
to do so, he shall suffer a reduction in the price, in proportion to what
is lacking in the area or number, unless the contract is rescinded
because the vendee does not accede to the failure to deliver what has
been stipulated. (1471)
Article 1543. The actions arising from articles 1539 and 1542 shall
prescribe in six months, counted from the day of delivery. (1472a)
Article 1544. If the same thing should have been sold to different
vendees, the ownership shall be transferred to the person who may have
first taken possession thereof in good faith, if it should be movable
property.
Should it be immovable property, the ownership shall belong to the
person acquiring it who in good faith first recorded it in the Registry of
Property.
Should there be no inscription, the ownership shall pertain to the person
who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is
good faith. (1473)
CHAPTER 5
Obligations of the Vendee
Article 1582. The vendee is bound to accept delivery and to pay the
price of the thing sold at the time and place stipulated in the contract.
If the time and place should not have been stipulated, the payment must
be made at the time and place of the delivery of the thing sold. (1500a)
Article 1583. Unless otherwise agreed, the buyer of goods is not bound
to accept delivery thereof by installments.
Where there is a contract of sale of goods to be delivered by stated
instalments, which are to be separately paid for, and the seller makes
defective deliveries in respect of one or more instalments, or the buyer
neglects or refuses without just cause to take delivery of or pay for one
or more instalments, it depends in each case on the terms of the
contract and the circumstances of the case, whether the breach of
contract is so material as to justify the injured party in refusing to
proceed further and suing for damages for breach of the entire contract,
or whether the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole contract as broken.
(n)
Article 1584. Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of examining them
for the purpose of ascertaining whether they are in conformity with the
contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to
the buyer, he is bound, on request, to afford the buyer a reasonable
opportunity of examining the goods for the purpose of ascertaining
whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with
an order from or agreement with the buyer, upon the terms that the
goods shall not be delivered by the carrier to the buyer until he has paid
the price, whether such terms are indicated by marking the goods with
the words "collect on delivery," or otherwise, the buyer is not entitled to
examine the goods before the payment of the price, in the absence of
agreement or usage of trade permitting such examination. (n)
Article 1585. The buyer is deemed to have accepted the goods when
he intimates to the seller that he has accepted them, or when the goods
have been delivered to him, and he does any act in relation to them
which is inconsistent with the ownership of the seller, or when, after the
lapse of a reasonable time, he retains the goods without intimating to
the seller that he has rejected them. (n)
Article 1586. In the absence of express or implied agreement of the
parties, acceptance of the goods by the buyer shall not discharge the
seller from liability in damages or other legal remedy for breach of any
promise or warranty in the contract of sale. But, if, after acceptance of
the goods, the buyer fails to give notice to the seller of the breach in
any promise of warranty within a reasonable time after the buyer knows,
or ought to know of such breach, the seller shall not be liable therefor.
(n)
Article 1587. Unless otherwise agreed, where goods are delivered to
the buyer, and he refuses to accept them, having the right so to do, he
is not bound to return them to the seller, but it is sufficient if he notifies
the seller that he refuses to accept them. If he voluntarily constitutes
himself a depositary thereof, he shall be liable as such. (n)
Article 1588. If there is no stipulation as specified in the first paragraph
of article 1523, when the buyer's refusal to accept the goods is without
just cause, the title thereto passes to him from the moment they are
placed at his disposal. (n)
Article 1589. The vendee shall owe interest for the period between the
delivery of the thing and the payment of the price, in the following three
cases:
(1) Should it have been so stipulated;
(2) Should the thing sold and delivered produce fruits or
income;
(3) Should he be in default, from the time of judicial or
extrajudicial demand for the payment of the price. (1501a)
Article 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable grounds
to fear such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the vendor
has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall
be bound to make the payment. A mere act of trespass shall not
authorize the suspension of the payment of the price. (1502a)
A. Obligations of Seller
1. Preserve Subject matter
Article 1163. Every person obliged to give something
is also obliged to take care of it with the proper diligence
of a good father of a family, unless the law or the
stipulation of the parties requires another standard of
care. (1094a).
2. Deliver with Fruits and Accessories
Article 1164. The creditor has a right to the fruits of
the thing from the time the obligation to deliver it arises.
However, he shall acquire no real right over it until the
same has been delivered to him.
Article 1166. The obligation to give a determinate thing
includes that of delivering all its accessions and
accessories, even though they may not have been
mentioned.
Article 1495. The vendor is bound to transfer the
ownership of and deliver, as well as warrant the thing
which is the object of the sale.
Article 1537. The vendor is bound to deliver the thing
sold and its accessions and accessories in the condition
in which they were upon the perfection of the contract.
All the fruits shall pertain to the vendee from the day on
which the contract was perfected.
3. Deliver the subject matter.
Article 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
Article 1478. The parties may stipulate that ownership
in the thing shall not pass to the purchaser until he has
fully paid the price.
Article 1497. The thing sold shall be understood as
delivered, when it is placed in the control and possession
of the vendee.
Article 1498. When the sale is made through a public
instrument, the execution thereof shall be equivalent to
the delivery of the thing which is the object of the
contract, if from the deed the contrary does not appear
or cannot clearly be inferred.
With regard to movable property, its delivery may also
be made by the delivery of the keys of the place or
depository where it is stored or kept.
(i)As to movables
Art. 1498
Article 1499. The delivery of movable property may
likewise be made by the mere consent or agreement of
the contracting parties, if the thing sold cannot be
transferred to the possession of the vendee at the time
of the sale, or if the latter already had it in his possession
for any other reason.
Article 1513. A person to whom a negotiable document
of title has been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a
purchaser in good faith for value and also such title to
the goods as the person to whose order the goods were
to be delivered by the terms of the document had or had
ability to convey to a purchaser in good faith for value;
and
(2) The direct obligation of the bailee issuing the
document to hold possession of the goods for him
according to the terms of the document as fully as if such
bailee had contracted directly with him. (n)
Article 1514. A person to whom a document of title has
been transferred, but not negotiated, acquires thereby,
as against the transferor, the title to the goods, subject
to the terms of any agreement with the transferor.
If the document is non-negotiable, such person also
acquires the right to notify the bailee who issued the
document of the transfer thereof, and thereby to acquire
the direct obligation of such bailee to hold possession of
the goods for him according to the terms of the
document.
Prior to the notification to such bailee by the transferor
or transferee of a non-negotiable document of title, the
 title of the transferee to the goods and the right to
acquire the obligation of such bailee may be defeated by
the levy of an attachment of execution upon the goods
by a creditor of the transferor, or by a notification to such
bailee by the transferor or a subsequent purchaser from
the transferor of a subsequent sale of the goods by the
transferor.
(ii)As to Immovables (ART. 1498)
(iii) As to incorporeal property(Art.1498)
Article 1501. With respect to incorporeal property, the
provisions of the first paragraph of article 1498 shall
govern. In any other case wherein said provisions are
not applicable, the placing of the titles of ownership in
the possession of the vendee or the use by the vendee
of his rights, with the vendor's consent, shall be
understood as a delivery.
e. Constitutum possesssorium
Article 1500. There may also be tradition constitutum
possessorium.
f.Traditio brevi manu
4. Transfer Ownership to Vendee Upon Delivery
Article 1477. The ownership of the thing sold shall be
transferred to the vendee upon the actual or constructive
delivery thereof.
Article 1478. The parties may stipulate that ownership
in the thing shall not pass to the purchaser until he has
fully paid the price.
Article 1496. The ownership of the thing sold is
acquired by the vendee from the moment it is delivered
to him in any of the ways specified in articles 1497 to
1501, or in any other manner signifying an agreement
that the possession is transferred from the vendor to the
vendee.
a. When buyer refuses to accept
Article 1588. If there is no stipulation as specified
in the first paragraph of article 1523, when the
buyer's refusal to accept the goods is without just
cause, the title thereto passes to him from the
moment they are placed at his disposal.
b. In cases of express or implied reservation
Article 1478. The parties may stipulate that
ownership in the thing shall not pass to the
purchaser until he has fully paid the price.
Article 1503. When there is a contract of sale of
specific goods, the seller may, by the terms of the
contract, reserve the right of possession or
ownership in the goods until certain conditions have
been fulfilled. The right of possession or ownership
may be thus reserved notwithstanding the delivery
of the goods to the buyer or to a carrier or other
bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading
the goods are deliverable to the seller or his agent,
or to the order of the seller or of his agent, the seller
thereby reserves the ownership in the goods. But,
if except for the form of the bill of lading, the
ownership would have passed to the buyer on
shipment of the goods, the seller's property in the
goods shall be deemed to be only for the purpose
of securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of lading
the goods are deliverable to order of the buyer or
of his agent, but possession of the bill of lading is
retained by the seller or his agent, the seller
thereby reserves a right to the possession of the
goods as against the buyer.
Where the seller of goods draws on the buyer for
the price and transmits the bill of exchange and bill
of lading together to the buyer to secure
acceptance or payment of the bill of exchange, the
buyer is bound to return the bill of lading if he does
not honor the bill of exchange, and if he wrongfully
retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that
the goods are deliverable to the buyer or to the
order of the buyer, or is indorsed in blank, or to the
buyer by the consignee named therein, one who
purchases in good faith, for value, the bill of lading,
or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not
been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by
the consignee named therein, or of the goods,
without notice of the facts making the transfer
wrongful.
5. Taking-out Insurance coverage
Article 1523. Where, in pursuance of a contract of sale,
the seller is authorized or required to send the goods to
the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for
in article 1503, first, second and third paragraphs, or
unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller
must make such contract with the carrier on behalf of
the buyer as may be reasonable, having regard to the
nature of the goods and the other circumstances of the
case. If the seller omit so to do, and the goods are lost
or damaged in course of transit, the buyer may decline
to treat the delivery to the carrier as a delivery to himself,
or may hold the seller responsible in damages.
 Unless otherwise agreed, where goods are sent by the
seller to the buyer under circumstances in which the
seller knows or ought to know that it is usual to insure,
the seller must give such notice to the buyer as may
enable him to insure them during their transit, and, if the
seller fails to do so, the goods shall be deemed to be at
his risk during such transit.
6. Time and place of delivery
Article 1521. Whether it is for the buyer to take
possession of the goods or of the seller to send them to
the buyer is a question depending in each case on the
contract, express or implied, between the parties. Apart
from any such contract, express or implied, or usage of
trade to the contrary, the place of delivery is the seller's
place of business if he has one, and if not his residence;
but in case of a contract of sale of specific goods, which
to the knowledge of the parties when the contract or the
sale was made were in some other place, then that place
is the place of delivery.
Where by a contract of sale the seller is bound to send
the goods to the buyer, but no time for sending them is
fixed, the seller is bound to send them within a
reasonable time.
Where the goods at the time of sale are in the possession
of a third person, the seller has not fulfilled his obligation
to deliver to the buyer unless and until such third person
acknowledges to the buyer that he holds the goods on
the buyer's behalf.
Demand or tender of delivery may be treated as
ineffectual unless made at a reasonable hour. What is a
reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental
to putting the goods into a deliverable state must be
borne by the seller.
7. Expenses of execution and registration
Article 1487. The expenses for the execution and
registration of the sale shall be borne by the vendor,
unless there is a stipulation to the contrary.
Putting goods in deliverable estate
Article 1521. Whether it is for the buyer to take
possession of the goods or of the seller to send them to
the buyer is a question depending in each case on the
contract, express or implied, between the parties. Apart
from any such contract, express or implied, or usage of
trade to the contrary, the place of delivery is the seller's
place of business if he has one, and if not his residence;
but in case of a contract of sale of specific goods, which
to the knowledge of the parties when the contract or the
sale was made were in some other place, then that place
is the place of delivery.
Where by a contract of sale the seller is bound to send the goods to the
buyer, but no time for sending them is fixed, the seller is bound to send
them within a reasonable time.
Where the goods at the time of sale are in the possession of a third
person, the seller has not fulfilled his obligation to deliver to the buyer
unless and until such third person acknowledges to the buyer that he
holds the goods on the buyer's behalf.
Demand or tender of delivery may be treated as ineffectual unless made
at a reasonable hour. What is a reasonable hour is a question of fact.
Unless otherwise agreed, the expenses of and incidental to putting the
goods into a deliverable state must be borne by the seller.
B. Special rules on Completeness of delivery
1. In case of movables
Article 1522. Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the
buyer may reject them, but if the buyer accepts or
retains the goods so delivered, knowing that the seller is
not going to perform the contract in full, he must pay for
them at the contract rate. If, however, the buyer has
used or disposed of the goods delivered before he knows
that the seller is not going to perform his contract in full,
the buyer shall not be liable for more than the fair value
to him of the goods so received.
Where the seller delivers to the buyer a quantity of goods
larger than he contracted to sell, the buyer may accept
the goods included in the contract and reject the rest. If
the buyer accepts the whole of the goods so delivered
he must pay for them at the contract rate.
Where the seller delivers to the buyer the goods he
contracted to sell mixed with goods of a different
description not included in the contract, the buyer may
accept the goods which are in accordance with the
contract and reject the rest.
In the preceding two paragraphs, if the subject matter is
indivisible, the buyer may reject the whole of the goods.
The provisions of this article are subject to any usage of
trade, special agreement, or course of dealing between
the parties.
Article 1537. The vendor is bound to deliver the thing
sold and its accessions and accessories in the condition
in which they were upon the perfection of the contract.

All the fruits shall pertain to the vendee from the day on
which the contract was perfected.
Article 1480. Any injury to or benefit from the thing
sold, after the contract has been perfected, from the
moment of the perfection of the contract to the time of
delivery, shall be governed by articles 1163 to 1165, and
1262.
This rule shall apply to the sale of fungible things, made
independently and for a single price, or without
consideration of their weight, number, or measure.
Should fungible things be sold for a price fixed according
to weight, number, or measure, the risk shall not be
imputed to the vendee until they have been weighed,
counted, or measured and delivered, unless the latter
has incurred in delay.
Article 1523. Where, in pursuance of a contract of sale,
the seller is authorized or required to send the goods to
the buyer, delivery of the goods to a carrier, whether
named by the buyer or not, for the purpose of
transmission to the buyer is deemed to be a delivery of
the goods to the buyer, except in the cases provided for
in article 1503, first, second and third paragraphs, or
unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller
must make such contract with the carrier on behalf of
the buyer as may be reasonable, having regard to the
nature of the goods and the other circumstances of the
case. If the seller omit so to do, and the goods are lost
or damaged in course of transit, the buyer may decline
to treat the delivery to the carrier as a delivery to himself,
or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the
seller to the buyer under circumstances in which the
seller knows or ought to know that it is usual to insure,
the seller must give such notice to the buyer as may
enable him to insure them during their transit, and, if the
seller fails to do so, the goods shall be deemed to be at
his risk during such transit.
(i)FAS Sales
(ii)FOB Sales
(iii)CIF Sales
b.Sales on Approval,Trial or Satisfaction
Article 1502. When goods are delivered to the buyer "on sale or
return" to give the buyer an option to return the goods instead of paying
the price, the ownership passes to the buyer on delivery, but he may
revest the ownership in the seller by returning or tendering the goods
within the time fixed in the contract, or, if no time has been fixed, within
a reasonable time. (n)
When goods are delivered to the buyer on approval or on trial or on
satisfaction, or other similar terms, the ownership therein passes to the
buyer:
(1) When he signifies his approval or acceptance to the seller
or does any other act adopting the transaction;
(2) If he does not signify his approval or acceptance to the
seller, but retains the goods without giving notice of rejection,
then if a time has been fixed for the return of the goods, on
the expiration of such time, and, if no time has been fixed, on
the expiration of a reasonable time. What is a reasonable time
is a question of fact.
c.Sale by Description and/or sample
Article 1481. In the contract of sale of goods by description or by
sample, the contract may be rescinded if the bulk of the goods delivered
do not correspond with the description or the sample, and if the contract
be by sample as well as description, it is not sufficient that the bulk of
goods correspond with the sample if they do not also correspond with
the description.
The buyer shall have a reasonable opportunity of comparing the bulk
with the description or the sample.
d.Buyers Right to inspect before acceptance;except when
carrier delivers COD
(Art1481)
Article 1584. Where goods are delivered to the buyer, which he has
not previously examined, he is not deemed to have accepted them
unless and until he has had a reasonable opportunity of examining them
for the purpose of ascertaining whether they are in conformity with the
contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders delivery of goods to
the buyer, he is bound, on request, to afford the buyer a reasonable
opportunity of examining the goods for the purpose of ascertaining
whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in accordance with
an order from or agreement with the buyer, upon the terms that the
goods shall not be delivered by the carrier to the buyer until he has paid
the price, whether such terms are indicated by marking the goods with
the words "collect on delivery," or otherwise, the buyer is not entitled to
examine the goods before the payment of the price, in the absence of
agreement or usage of trade permitting such examination.
2. In case of immovables
a. Where sold per unit or number
Article 1539. The obligation to deliver the thing
sold includes that of placing in the control of the
vendee all that is mentioned in the contract, in
conformity with the following rules:
If the sale of real estate should be made with a
statement of its area, at the rate of a certain price
for a unit of measure or number, the vendor shall
be obliged to deliver to the vendee, if the latter
should demand it, all that may have been stated in
the contract; but, should this be not possible, the
vendee may choose between a proportional
reduction of the price and the rescission of the
 contract, provided that, in the latter case, the lack
in the area be not less than one-tenth of that
stated.
The same shall be done, even when the area is the
same, if any part of the immovable is not of the
quality specified in the contract.
The rescission, in this case, shall only take place at
the will of the vendee, when the inferior value of
the thing sold exceeds one-tenth of the price
agreed upon.
Nevertheless, if the vendee would not have bought
the immovable had he known of its smaller area of
inferior quality, he may rescind the sale. (1469a)
Article 1540. If, in the case of the preceding
article, there is a greater area or number in the
immovable than that stated in the contract, the
vendee may accept the area included in the
contract and reject the rest. If he accepts the whole
area, he must pay for the same at the contract rate.
b. Where sold for lump sum
Article 1542. In the sale of real estate, made for
a lump sum and not at the rate of a certain sum for
a unit of measure or number, there shall be no
increase or decrease of the price, although there be
a greater or less area or number than that stated in
the contract.
The same rule shall be applied when two or more
immovables as sold for a single price; but if, besides
mentioning the boundaries, which is indispensable
in every conveyance of real estate, its area or
number should be designated in the contract, the
vendor shall be bound to deliver all that is included
within said boundaries, even when it exceeds the
area or number specified in the contract; and,
should he not be able to do so, he shall suffer a
reduction in the price, in proportion to what is
lacking in the area or number, unless the contract
is rescinded because the vendee does not accede
to the failure to deliver what has been stipulated
C. Double Sales
Article 1544. If the same thing should have been sold to
different vendees, the ownership shall be transferred to the
person who may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the ownership shall belong
to the person acquiring it who in good faith first recorded it in
the Registry of Property.
Should there be no inscription, the ownership shall pertain to
the person who in good faith was first in the possession; and,
in the absence thereof, to the person who presents the oldest
title, provided there is good faith. (1473)
Article 1165. When what is to be delivered is a determinate
thing, the creditor, in addition to the right granted him by
article 1170, may compel the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the
obligation be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same
thing to two or more persons who do not have the same
interest, he shall be responsible for any fortuitous event until
he has effected the delivery.
D. Obligations of Buyer
1. Pay the price
Article 1582. The vendee is bound to accept delivery
and to pay the price of the thing sold at the time and
place stipulated in the contract.
If the time and place should not have been stipulated,
the payment must be made at the time and place of the
delivery of the thing sold.
2. Accept Delivery
Article 1582
Article 1583. Unless otherwise agreed, the buyer of
goods is not bound to accept delivery thereof by
installments.
Where there is a contract of sale of goods to be delivered
by stated instalments, which are to be separately paid
for, and the seller makes defective deliveries in respect
of one or more instalments, or the buyer neglects or
refuses without just cause to take delivery of or pay for
one or more instalments, it depends in each case on the
terms of the contract and the circumstances of the case,
whether the breach of contract is so material as to justify
the injured party in refusing to proceed further and suing
for damages for breach of the entire contract, or whether
the breach is severable, giving rise to a claim for
compensation but not to a right to treat the whole
contract as broken. (n)
Article 1584. Where goods are delivered to the buyer,
which he has not previously examined, he is not deemed
to have accepted them unless and until he has had a
reasonable opportunity of examining them for the
purpose of ascertaining whether they are in conformity
with the contract if there is no stipulation to the contrary.
Unless otherwise agreed, when the seller tenders
delivery of goods to the buyer, he is bound, on request,
to afford the buyer a reasonable opportunity of
examining the goods for the purpose of ascertaining
whether they are in conformity with the contract.
Where goods are delivered to a carrier by the seller, in
accordance with an order from or agreement with the
buyer, upon the terms that the goods shall not be
delivered by the carrier to the buyer until he has paid the
price, whether such terms are indicated by marking the
goods with the words "collect on delivery," or otherwise,
the buyer is not entitled to examine the goods before the
payment of the price, in the absence of agreement or
usage of trade permitting such examination. (n)
Article 1585. The buyer is deemed to have accepted
the goods when he intimates to the seller that he has
accepted them, or when the goods have been delivered
to him, and he does any act in relation to them which is
inconsistent with the ownership of the seller, or when,
after the lapse of a reasonable time, he retains the goods
without intimating to the seller that he has rejected
them.
VII. DOCUMENTS OF TITLE (1507-1520)
1. Definition
Article 1636. In the preceding articles in this Title
governing the sale of goods, unless the context or
subject matter otherwise requires:
(1)"Document of title to goods" includes any bill of
lading, dock warrant, "quedan," or warehouse
receipt or order for the delivery of goods, or any
other document used in the ordinary course of
business in the sale or transfer of goods, as proof
of the possession or control of the goods, or
authorizing or purporting to authorize the possessor
 of the document to transfer or receive, either by
indorsement or by delivery, goods represented by
such document.
"Goods" includes all chattels personal but not things
in action or money of legal tender in the Philippines.
The term includes growing fruits or crops.
"Order" relating to documents of title means an
order by indorsement on the documents.
"Quality of goods" includes their state or condition.
"Specific goods" means goods identified and agreed
upon at the time a contract of sale is made.
An antecedent or pre-existing claim, whether for
money or not, constitutes "value" where goods or
documents of title are taken either in satisfaction
thereof or as security therefor.
(2)A person is insolvent within the meaning of this
Title who either has ceased to pay his debts in the
ordinary course of business or cannot pay his debts
as they become due, whether insolvency
proceedings have been commenced or not.
(3) Goods are in a "deliverable state" within the
meaning of this Title when they are in such a state
that the buyer would, under the contract, be bound
to take delivery of them. (n)
2. Purpose of Documents of title
3. Negotiable Documents of Title
a. How Negotiated
Article 1508. A negotiable document of title may be negotiated by
delivery:
(1) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
to deliver the goods to the bearer; or
(2) Where by the terms of the document the carrier,
warehouseman or other bailee issuing the same undertakes
to deliver the goods to the order of a specified person, and
such person or a subsequent indorsee of the document has
indorsed it in blank or to the bearer.
Where by the terms of a negotiable document of title the
goods are deliverable to bearer or where a negotiable
document of title has been indorsed in blank or to bearer, any
holder may indorse the same to himself or to any specified
person, and in such case the document shall thereafter be
negotiated only by the indorsement of such indorsee. (n)
Article 1509. A negotiable document of title may be negotiated by the
indorsement of the person to whose order the goods are by the terms
of the document deliverable. Such indorsement may be in blank, to
bearer or to a specified person. If indorsed to a specified person, it may
be again negotiated by the indorsement of such person in blank, to
bearer or to another specified person. Subsequent negotiations may be
made in like manner.
b.Who can Negotiate
Article 1512. A negotiable document of title may be negotiated:
(1) By the owner thereof; or
(2) By any person to whom the possession or custody of the
document has been entrusted by the owner, if, by the terms
of the document the bailee issuing the document undertakes
to deliver the goods to the order of the person to whom the
possession or custody of the document has been entrusted,
or if at the time of such entrusting the document is in such
form that it may be negotiated by delivery.
c. Effects of Negotiation
Article 1513. A person to whom a negotiable document of title has
been duly negotiated acquires thereby:
(1) Such title to the goods as the person negotiating the
document to him had or had ability to convey to a purchaser
in good faith for value and also such title to the goods as the
person to whose order the goods were to be delivered by the
terms of the document had or had ability to convey to a
purchaser in good faith for value; and
(2) The direct obligation of the bailee issuing the document to
hold possession of the goods for him according to the terms
of the document as fully as if such bailee had contracted
directly with him.
d. Unauthorized Negotiation
Article 1518. The validity of the negotiation of a negotiable document
of title is not impaired by the fact that the negotiation was a breach of
duty on the part of the person making the negotiation, or by the fact
that the owner of the document was deprived of the possession of the
same by loss, theft, fraud, accident, mistake, duress, or conversion, if
the person to whom the document was negotiated or a person to whom
the document was subsequently negotiated paid value therefor in good
faith without notice of the breach of duty, or loss, theft, fraud, accident,
mistake, duress or conversion.
4.Non-negotiable Documents of title
a. How transferred or Assigned
Article 1514. A person to whom a document of title has been
transferred, but not negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to the terms of any agreement
with the transferor.
If the document is non-negotiable, such person also acquires the right
to notify the bailee who issued the document of the transfer thereof,
and thereby to acquire the direct obligation of such bailee to hold
possession of the goods for him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of
a non-negotiable document of title, the title of the transferee to the
goods and the right to acquire the obligation of such bailee may be
defeated by the levy of an attachment of execution upon the goods by
a creditor of the transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transferor of a
subsequent sale of the goods by the transferor.
b.Effects of transfer
Article 1514. A person to whom a document of title has been
transferred, but not negotiated, acquires thereby, as against the
transferor, the title to the goods, subject to the terms of any agreement
with the transferor.
If the document is non-negotiable, such person also acquires the right
to notify the bailee who issued the document of the transfer thereof,
and thereby to acquire the direct obligation of such bailee to hold
possession of the goods for him according to the terms of the document.
Prior to the notification to such bailee by the transferor or transferee of
a non-negotiable document of title, the title of the transferee to the
goods and the right to acquire the obligation of such bailee may be
defeated by the levy of an attachment of execution upon the goods by
a creditor of the transferor, or by a notification to such bailee by the
transferor or a subsequent purchaser from the transferor of a
subsequent sale of the goods by the transferor.
5.Warranties of Seller of documents
Article 1516. A person who for value negotiates or transfers a
document of title by indorsement or delivery, including one who assigns
for value a claim secured by a document of title unless a contrary
intention appears, warrants:
(1) That the document is genuine;
(2) That he has a legal right to negotiate or transfer it;
 (3) That he has knowledge of no fact which would impair the
validity or worth of the document; and
(4) That he has a right to transfer the title to the goods and
that the goods are merchantable or fit for a particular
purpose, whenever such warranties would have been implied
if the contract of the parties had been to transfer without a
document of title the goods represented thereby.
6.Rules of levy/Garnishment of goods
Art 1514
Article 1519. If goods are delivered to a bailee by the owner or by a
person whose act in conveying the title to them to a purchaser in good
faith for value would bind the owner and a negotiable document of title
is issued for them they cannot thereafter, while in possession of such
bailee, be attached by garnishment or otherwise or be levied under an
execution unless the document be first surrendered to the bailee or its
negotiation enjoined. The bailee shall in no case be compelled to deliver
up the actual possession of the goods until the document is surrendered
to him or impounded by the court. (n)
Article 1520. A creditor whose debtor is the owner of a negotiable
document of title shall be entitled to such aid from courts of appropriate
jurisdiction by injunction and otherwise in attaching such document or
in satisfying the claim by means thereof as is allowed at law or in equity
in regard to property which cannot readily be attached or levied upon
by ordinary legal process.
VIII. SALE BY NON-OWNER OR BY ONE HAVING VOIDABLE
TITLE:LIFE OF A CONTRACT OF SALE
1.Effect of Sale where seller not owner at time of delivery
Article 1505. Subject to the provisions of this Title, where goods are
sold by a person who is not the owner thereof, and who does not sell
them under authority or with the consent of the owner, the buyer
acquires no better title to the goods than the seller had, unless the
owner of the goods is by his conduct precluded from denying the seller's
authority to sell.
Nothing in this Title, however, shall affect:
(1) The provisions of any factors' act, recording laws, or any
other provision of law enabling the apparent owner of goods
to dispose of them as if he were the true owner thereof;
(2) The validity of any contract of sale under statutory power
of sale or under the order of a court of competent jurisdiction;
(3) Purchases made in a merchant's store, or in fairs, or
markets, in accordance with the Code of Commerce and
special laws.
2.Exceptions:When ownership transfers by act of the non-
owner
Article 1434. When a person who is not the owner of a thing sells or
alienates and delivers it, and later the seller or grantor acquires title
thereto, such title passes by operation of law to the buyer or grantee.
3.Sale by one having voidable title( Art1506 ,as an exception to art 559)
Article 1506. Where the seller of goods has a voidable title thereto,
but his title has not been avoided at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith,
for value, and without notice of the seller's defect of title.
IX. LOSS, DETERIORATION, FRUITS AND OTHERS BENEFITS
1.No application when subject matter is determinable
Article 1236. The creditor is not bound to accept payment or
performance by a third person who has no interest in the fulfillment of
the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of
the debtor, he can recover only insofar as the payment has been
beneficial to the debtor.
2.Effect of loss/Detoriaration of thing sold:
a.Before Perfection
b.At time of perfection
Article 1493. If at the time the contract of sale is perfected, the thing
which is the object of the contract has been entirely lost, the contract
shall be without any effect.
But if the thing should have been lost in part only, the vendee may
choose between withdrawing from the contract and demanding the
remaining part, paying its price in proportion to the total sum agreed
upon. (1460a)
Article 1494. Where the parties purport a sale of specific goods, and
the goods without the knowledge of the seller have perished in part or
have wholly or in a material part so deteriorated in quality as to be
substantially changed in character, the buyer may at his option treat the
sale:
(1) As avoided; or
(2) As valid in all of the existing goods or in so much thereof
as have not deteriorated, and as binding the buyer to pay the
agreed price for the goods in which the ownership will pass,
if the sale was divisible.
c.After Perfection but before delivery
Article 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall acquire no
real right over it until the same has been delivered to him.
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss or
deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall
be obliged to pay damages; it is understood that the thing is
lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the obligation
and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary
Article 1262. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous
events, the loss of the thing does not extinguish the obligation, and he
shall be responsible for damages. The same rule applies when the
nature of the obligation requires the assumption of risk.
(1)Loss by Fault of a party
Article 1480. Any injury to or benefit from the thing sold, after the
contract has been perfected, from the moment of the perfection of the
contract to the time of delivery, shall be governed by articles 1163 to
1165, and 1262.
This rule shall apply to the sale of fungible things, made independently
and for a single price, or without consideration of their weight, number,
or measure.
Should fungible things be sold for a price fixed according to weight,
number, or measure, the risk shall not be imputed to the vendee until
they have been weighed, counted, or measured and delivered, unless
the latter has incurred in delay.
Article 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the
time of such delivery;
(2) Where actual delivery has been delayed through the fault
of either the buyer or seller the goods are at the risk of the
party in fault.
Article 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in article 1189 shall be observed, the vendor
being considered the debtor.
(2)Loss by fortuitous event
Article 1480. Any injury to or benefit from the thing sold, after the
contract has been perfected, from the moment of the perfection of the
contract to the time of delivery, shall be governed by articles 1163 to
1165, and 1262.
This rule shall apply to the sale of fungible things, made independently
and for a single price, or without consideration of their weight, number,
or measure.
Should fungible things be sold for a price fixed according to weight,
number, or measure, the risk shall not be imputed to the vendee until
they have been weighed, counted, or measured and delivered, unless
the latter has incurred in delay
Article 1163. Every person obliged to give something is also obliged to
take care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another standard
of care.
Article 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall acquire no
real right over it until the same has been delivered to him.
Article 1165. When what is to be delivered is a determinate thing, the
creditor, in addition to the right granted him by article 1170, may compel
the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation
be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to two
or more persons who do not have the same interest, he shall be
responsible for any fortuitous event until he has effected the delivery.
Article 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the
time of such delivery;
(2) Where actual delivery has been delayed through the fault
of either the buyer or seller the goods are at the risk of the
party in fault.
Article 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in article 1189 shall be observed, the vendor
being considered the debtor.
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss or
deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall
be obliged to pay damages; it is understood that the thing is
lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the obligation
and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.
(3)Deterioration
Article 1480. Any injury to or benefit from the thing sold, after the
contract has been perfected, from the moment of the perfection of the
contract to the time of delivery, shall be governed by articles 1163 to
1165, and 1262.
This rule shall apply to the sale of fungible things, made independently
and for a single price, or without consideration of their weight, number,
or measure.
Should fungible things be sold for a price fixed according to weight,
number, or measure, the risk shall not be imputed to the vendee until
they have been weighed, counted, or measured and delivered, unless
the latter has incurred in delay.
Article 1163. Every person obliged to give something is also obliged to
take care of it with the proper diligence of a good father of a family,
unless the law or the stipulation of the parties requires another standard
of care. (1094a)
Article 1164. The creditor has a right to the fruits of the thing from
the time the obligation to deliver it arises. However, he shall acquire no
real right over it until the same has been delivered to him. (1095)
Article 1165. When what is to be delivered is a determinate thing, the
creditor, in addition to the right granted him by article 1170, may compel
the debtor to make the delivery.
If the thing is indeterminate or generic, he may ask that the obligation
be complied with at the expense of the debtor.
If the obligor delays, or has promised to deliver the same thing to two
or more persons who do not have the same interest, he shall be
responsible for any fortuitous event until he has effected the delivery.
Article 1262. An obligation which consists in the delivery of a
determinate thing shall be extinguished if it should be lost or destroyed
without the fault of the debtor, and before he has incurred in delay.
When by law or stipulation, the obligor is liable even for fortuitous
events, the loss of the thing does not extinguish the obligation, and he
shall be responsible for damages. The same rule applies when the
nature of the obligation requires the assumption of risk.
Article 1189. When the conditions have been imposed with the
intention of suspending the efficacy of an obligation to give, the
following rules shall be observed in case of the improvement, loss or
deterioration of the thing during the pendency of the condition:
(1) If the thing is lost without the fault of the debtor, the
obligation shall be extinguished;
(2) If the thing is lost through the fault of the debtor, he shall
be obliged to pay damages; it is understood that the thing is
lost when it perishes, or goes out of commerce, or disappears
in such a way that its existence is unknown or it cannot be
recovered;
(3) When the thing deteriorates without the fault of the
debtor, the impairment is to be borne by the creditor;
(4) If it deteriorates through the fault of the debtor, the
creditor may choose between the rescission of the obligation
and its fulfillment, with indemnity for damages in either case;
(5) If the thing is improved by its nature, or by time, the
improvement shall inure to the benefit of the creditor;
(6) If it is improved at the expense of the debtor, he shall
have no other right than that granted to the usufructuary.
Article 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in article 1189 shall be observed, the vendor
being considered the debtor.
(4)Fruits or improvements from time of perfection pertain to buyer
Article 1480. Any injury to or benefit from the thing sold, after the
contract has been perfected, from the moment of the perfection of the
contract to the time of delivery, shall be governed by articles 1163 to
1165, and 1262.
This rule shall apply to the sale of fungible things, made independently
and for a single price, or without consideration of their weight, number,
or measure.
Should fungible things be sold for a price fixed according to weight,
number, or measure, the risk shall not be imputed to the vendee until
they have been weighed, counted, or measured and delivered, unless
the latter has incurred in delay.
Article 1537. The vendor is bound to deliver the thing sold and its
accessions and accessories in the condition in which they were upon the
perfection of the contract.
All the fruits shall pertain to the vendee from the day on which the
contract was perfected. (1468a)
Article 1538. In case of loss, deterioration or improvement of the thing
before its delivery, the rules in article 1189 shall be observed, the vendor
being considered the debtor
d.After delivery
Article 1504. Unless otherwise agreed, the goods remain at the seller's
risk until the ownership therein is transferred to the buyer, but when the
ownership therein is transferred to the buyer the goods are at the
buyer's risk whether actual delivery has been made or not, except that:
(1) Where delivery of the goods has been made to the buyer
or to a bailee for the buyer, in pursuance of the contract and
the ownership in the goods has been retained by the seller
merely to secure performance by the buyer of his obligations
under the contract, the goods are at the buyer's risk from the
time of such delivery;
(2) Where actual delivery has been delayed through the fault
of either the buyer or seller the goods are at the risk of the
party in fault.
X. Remedies for breach of contract of sale(1594-1599)
Article 1594. Actions for breach of the contract of sale of goods shall
be governed particularly by the provisions of this Chapter, and as to
matters not specifically provided for herein, by other applicable
provisions of this Title. (n)
Article 1595. Where, under a contract of sale, the ownership of the
goods has passed to the buyer and he wrongfully neglects or refuses to
pay for the goods according to the terms of the contract of sale, the
seller may maintain an action against him for the price of the goods.
Where, under a contract of sale, the price is payable on a certain day,
irrespective of delivery or of transfer of title and the buyer wrongfully
neglects or refuses to pay such price, the seller may maintain an action
for the price although the ownership in the goods has not passed. But
it shall be a defense to such an action that the seller at any time before
the judgment in such action has manifested an inability to perform the
contract of sale on his part or an intention not to perform it.
Although the ownership in the goods has not passed, if they cannot
readily be resold for a reasonable price, and if the provisions of article
1596, fourth paragraph, are not applicable, the seller may offer to
deliver the goods to the buyer, and, if the buyer refuses to receive them,
may notify the buyer that the goods are thereafter held by the seller as
bailee for the buyer. Thereafter the seller may treat the goods as the
buyer's and may maintain an action for the price. (n)
Article 1596. Where the buyer wrongfully neglects or refuses to accept
and pay for the goods, the seller may maintain an action against him for
damages for nonacceptance.
The measure of damages is the estimated loss directly and naturally
resulting in the ordinary course of events from the buyer's breach of
contract.
Where there is an available market for the goods in question, the
measure of damages is, in the absence of special circumstances showing
proximate damage of a different amount, the difference between the
contract price and the market or current price at the time or times when
the goods ought to have been accepted, or, if no time was fixed for
acceptance, then at the time of the refusal to accept.
If, while labor or expense of material amount is necessary on the part
of the seller to enable him to fulfill his obligations under the contract of
sale, the buyer repudiates the contract or notifies the seller to proceed
no further therewith, the buyer shall be liable to the seller for labor
performed or expenses made before receiving notice of the buyer's
repudiation or countermand. The profit the seller would have made if
the contract or the sale had been fully performed shall be considered in
awarding the damages. (n)
Article 1597. Where the goods have not been delivered to the buyer,
and the buyer has repudiated the contract of sale, or has manifested his
inability to perform his obligations thereunder, or has committed a
breach thereof, the seller may totally rescind the contract of sale by
giving notice of his election so to do to the buyer. (n)
Article 1598. Where the seller has broken a contract to deliver specific
or ascertained goods, a court may, on the application of the buyer, direct
that the contract shall be performed specifically, without giving the seller
the option of retaining the goods on payment of damages. The judgment
or decree may be unconditional, or upon such terms and conditions as
to damages, payment of the price and otherwise, as the court may deem
just. (n)
Article 1599. Where there is a breach of warranty by the seller, the
buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach
of warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller
for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the
goods have already been received, return them or offer to return them
to the seller and recover the price or any part thereof which has been
paid.
When the buyer has claimed and been granted a remedy in anyone of
these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind
the sale if he knew of the breach of warranty when he accepted the
goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to
offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and rescinding the
sale.
Where the buyer is entitled to rescind the sale and elects to do so, he
shall cease to be liable for the price upon returning or offering to return
the goods. If the price or any part thereof has already been paid, the
seller shall be liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately after an offer
to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the
seller refuses to accept an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the goods as bailee for the
seller, but subject to a lien to secure the payment of any portion of the
price which has been paid, and with the remedies for the enforcement
of such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence
of special circumstances showing proximate damage of a greater
amount, is the difference between the value of the goods at the time of
delivery to the buyer and the value they would have had if they had
answered to the warranty. (n)
A. On part of Seller
1.In case of Movables
Article 1593. With respect to movable property, the rescission of the
sale shall of right take place in the interest of the vendor, if the vendee,
upon the expiration of the period fixed for the delivery of the thing,
should not have appeared to receive it, or, having appeared, he should
not have tendered the price at the same time, unless a longer period
has been stipulated for its payment. (&1595 -1597)
2. Unpaid Seller of Goods
Article 1524. The vendor shall not be bound to deliver the thing sold,
if the vendee has not paid him the price, or if no period for the payment
has been fixed in the contract. (1466)
Article 1525. The seller of goods is deemed to be an unpaid seller
within the meaning of this Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it was
received has been broken by reason of the dishonor of the instrument,
the insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an agent of the seller
to whom the bill of lading has been indorsed, or a consignor or agent
who has himself paid, or is directly responsible for the price, or any other
person who is in the position of a seller. (n)
Article 1526. Subject to the provisions of this Title, notwithstanding
that the ownership in the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is
in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods
in transitu after he has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the
unpaid seller has, in addition to his other remedies a right of withholding
delivery similar to and coextensive with his rights of lien and stoppage
in transitu where the ownership has passed to the buyer. (n)
Article 1527. Subject to the provisions of this Title, the unpaid seller
of goods who is in possession of them is entitled to retain possession of
them until payment or tender of the price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as to credit;
(2) Where the goods have been sold on credit, but the term of credit
has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer. (n)
Article 1528. Where an unpaid seller has made part delivery of the
goods, he may exercise his right of lien on the remainder, unless such
part delivery has been made under such circumstances as to show an
intent to waive the lien or right of retention. (n)
Article 1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the ownership
in the goods or the right to the possession thereof;
(2) When the buyer or his agent lawfully obtains possession of the
goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien
by reason only that he has obtained judgment or decree for the price of
the goods. (n)
Article 1530. Subject to the provisions of this Title, when the buyer of
goods is or becomes insolvent, the unpaid seller who has parted with
the possession of the goods has the right of stopping them in transitu,
that is to say, he may resume possession of the goods at any time while
they are in transit, and he will then become entitled to the same rights
in regard to the goods as he would have had if he had never parted with
the possession. (n)
Article 1531. Goods are in transit within the meaning of the preceding
article:
(1) From the time when they are delivered to a carrier by land, water,
or air, or other bailee for the purpose of transmission to the buyer, until
the buyer, or his agent in that behalf, takes delivery of them from such
carrier or other bailee;
(2) If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive
them back.
Goods are no longer in transit within the meaning of the preceding
article:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods
before their arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the
carrier or other bailee acknowledges to the buyer or his agent that he
holds the goods on his behalf and continues in possession of them as
bailee for the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods
to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane
chartered by the buyer, it is a question depending on the circumstances
of the particular case, whether they are in the possession of the carrier
as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent
in that behalf, the remainder of the goods may be stopped in transitu,
unless such part delivery has been under such circumstances as to show
an agreement with the buyer to give up possession of the whole of the
goods. (n)
Article 1532. The unpaid seller may exercise his right of stoppage in
transitu either by obtaining actual possession of the goods or by giving
notice of his claim to the carrier or other bailee in whose possession the
goods are. Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter case the notice,
to be effectual, must be given at such time and under such
circumstances that the principal, by the exercise of reasonable diligence,
may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier,
or other bailee in possession of the goods, he must redeliver the goods
to, or according to the directions of, the seller. The expenses of such
delivery must be borne by the seller. If, however, a negotiable document
of title representing the goods has been issued by the carrier or other
bailee, he shall not be obliged to deliver or justified in delivering the
goods to the seller unless such document is first surrendered for
cancellation. (n)
Article 1533. Where the goods are of perishable nature, or where the
seller expressly reserves the right of resale in case the buyer should
make default, or where the buyer has been in default in the payment of
the price for an unreasonable time, an unpaid seller having a right of
lien or having stopped the goods in transitu may resell the goods. He
shall not thereafter be liable to the original buyer upon the contract of
sale or for any profit made by such resale, but may recover from the
buyer damages for any loss occasioned by the breach of the contract of
sale.
Where a resale is made, as authorized in this article, the buyer acquires
a good title as against the original buyer.
It is not essential to the validity of resale that notice of an intention to
resell the goods be given by the seller to the original buyer. But where
the right to resell is not based on the perishable nature of the goods or
upon an express provision of the contract of sale, the giving or failure
to give such notice shall be relevant in any issue involving the question
whether the buyer had been in default for an unreasonable time before
the resale was made.
It is not essential to the validity of a resale that notice of the time and
place of such resale should be given by the seller to the original buyer.
The seller is bound to exercise reasonable care and judgment in making
a resale, and subject to this requirement may make a resale either by
public or private sale. He cannot, however, directly or indirectly buy the
goods. (n)
Article 1534. An unpaid seller having the right of lien or having stopped
the goods in transitu, may rescind the transfer of title and resume the
ownership in the goods, where he expressly reserved the right to do so
in case the buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable time. The seller
shall not thereafter be liable to the buyer upon the contract of sale, but
may recover from the buyer damages for any loss occasioned by the
breach of the contract.
The transfer of title shall not be held to have been rescinded by an
unpaid seller until he has manifested by notice to the buyer or by some
other overt act an intention to rescind. It is not necessary that such
overt act should be communicated to the buyer, but the giving or failure
to give notice to the buyer of the intention to rescind shall be relevant
in any issue involving the question whether the buyer had been in
default for an unreasonable time before the right of rescission was
asserted. (n)
Article 1535. Subject to the provisions of this Title, the unpaid seller's
right of lien or stoppage in transitu is not affected by any sale, or other
disposition of the goods which the buyer may have made, unless the
seller has assented thereto.
If, however, a negotiable document of title has been issued for goods,
no seller's lien or right of stoppage in transitu shall defeat the right of
any purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of
the seller's claim to a lien or right of stoppage in transitu. (n)
a.Definition of Unpaid Seller
Article 1525. The seller of goods is deemed to be an unpaid seller
within the meaning of this Title:
(1) When the whole of the price has not been paid or tendered;
(2) When a bill of exchange or other negotiable instrument has been
received as conditional payment, and the condition on which it was
received has been broken by reason of the dishonor of the instrument,
the insolvency of the buyer, or otherwise.
In articles 1525 to 1535 the term "seller" includes an agent of the seller
to whom the bill of lading has been indorsed, or a consignor or agent
who has himself paid, or is directly responsible for the price, or any other
person who is in the position of a seller.
b. Rights of Unpaid Seller
-Possessory Lien
Article 1526. Subject to the provisions of this Title, notwithstanding
that the ownership in the goods may have passed to the buyer, the
unpaid seller of goods, as such, has:
(1) A lien on the goods or right to retain them for the price while he is
in possession of them;
(2) In case of the insolvency of the buyer, a right of stopping the goods
in transitu after he has parted with the possession of them;
(3) A right of resale as limited by this Title;
(4) A right to rescind the sale as likewise limited by this Title.
Where the ownership in the goods has not passed to the buyer, the
unpaid seller has, in addition to his other remedies a right of withholding
delivery similar to and coextensive with his rights of lien and stoppage
in transitu where the ownership has passed to the buyer. (n)
Article 1527. Subject to the provisions of this Title, the unpaid seller
of goods who is in possession of them is entitled to retain possession of
them until payment or tender of the price in the following cases, namely:
(1) Where the goods have been sold without any stipulation as to credit;
(2) Where the goods have been sold on credit, but the term of credit
has expired;
(3) Where the buyer becomes insolvent.
The seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer. (n)
Article 1528. Where an unpaid seller has made part delivery of the
goods, he may exercise his right of lien on the remainder, unless such
part delivery has been made under such circumstances as to show an
intent to waive the lien or right of retention. (n)
Article 1529. The unpaid seller of goods loses his lien thereon:
(1) When he delivers the goods to a carrier or other bailee for the
purpose of transmission to the buyer without reserving the ownership
in the goods or the right to the possession thereof;
(2) When the buyer or his agent lawfully obtains possession of the
goods;
(3) By waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien
by reason only that he has obtained judgment or decree for the price of
the goods. (n)
Article 1503. When there is a contract of sale of specific goods, the
seller may, by the terms of the contract, reserve the right of possession
or ownership in the goods until certain conditions have been fulfilled.
The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or
other bailee for the purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller or of
his agent, the seller thereby reserves the ownership in the goods. But,
if except for the form of the bill of lading, the ownership would have
passed to the buyer on shipment of the goods, the seller's property in
the goods shall be deemed to be only for the purpose of securing
performance by the buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession of the
bill of lading is retained by the seller or his agent, the seller thereby
reserves a right to the possession of the goods as against the buyer.
Where the seller of goods draws on the buyer for the price and transmits
the bill of exchange and bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor the bill of exchange, and if
he wrongfully retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that the goods are
deliverable to the buyer or to the order of the buyer, or is indorsed in
blank, or to the buyer by the consignee named therein, one who
purchases in good faith, for value, the bill of lading, or goods from the
buyer will obtain the ownership in the goods, although the bill of
exchange has not been honored, provided that such purchaser has
received delivery of the bill of lading indorsed by the consignee named
therein, or of the goods, without notice of the facts making the transfer
wrongful. (n)
Article 1535. Subject to the provisions of this Title, the unpaid seller's
right of lien or stoppage in transitu is not affected by any sale, or other
disposition of the goods which the buyer may have made, unless the
seller has assented thereto.
If, however, a negotiable document of title has been issued for goods,
no seller's lien or right of stoppage in transitu shall defeat the right of
any purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of
the seller's claim to a lien or right of stoppage in transitu. (n)
-Stoppage in Transitu
Article 1530. Subject to the provisions of this Title, when the buyer of
goods is or becomes insolvent, the unpaid seller who has parted with
the possession of the goods has the right of stopping them in transitu,
that is to say, he may resume possession of the goods at any time while
they are in transit, and he will then become entitled to the same rights
in regard to the goods as he would have had if he had never parted with
the possession. (n)
Article 1531. Goods are in transit within the meaning of the preceding
article:
(1) From the time when they are delivered to a carrier by land, water,
or air, or other bailee for the purpose of transmission to the buyer, until
the buyer, or his agent in that behalf, takes delivery of them from such
carrier or other bailee;
(2) If the goods are rejected by the buyer, and the carrier or other bailee
continues in possession of them, even if the seller has refused to receive
them back.
Goods are no longer in transit within the meaning of the preceding
article:
(1) If the buyer, or his agent in that behalf, obtains delivery of the goods
before their arrival at the appointed destination;
(2) If, after the arrival of the goods at the appointed destination, the
carrier or other bailee acknowledges to the buyer or his agent that he
holds the goods on his behalf and continues in possession of them as
bailee for the buyer or his agent; and it is immaterial that further
destination for the goods may have been indicated by the buyer;
(3) If the carrier or other bailee wrongfully refuses to deliver the goods
to the buyer or his agent in that behalf.
If the goods are delivered to a ship, freight train, truck, or airplane
chartered by the buyer, it is a question depending on the circumstances
of the particular case, whether they are in the possession of the carrier
as such or as agent of the buyer.
If part delivery of the goods has been made to the buyer, or his agent
in that behalf, the remainder of the goods may be stopped in transitu,
unless such part delivery has been under such circumstances as to show
an agreement with the buyer to give up possession of the whole of the
goods. (n)
Article 1532. The unpaid seller may exercise his right of stoppage in
transitu either by obtaining actual possession of the goods or by giving
notice of his claim to the carrier or other bailee in whose possession the
goods are. Such notice may be given either to the person in actual
possession of the goods or to his principal. In the latter case the notice,
to be effectual, must be given at such time and under such
circumstances that the principal, by the exercise of reasonable diligence,
may prevent a delivery to the buyer.
When notice of stoppage in transitu is given by the seller to the carrier,
or other bailee in possession of the goods, he must redeliver the goods
to, or according to the directions of, the seller. The expenses of such
delivery must be borne by the seller. If, however, a negotiable document
of title representing the goods has been issued by the carrier or other
bailee, he shall not be obliged to deliver or justified in delivering the
goods to the seller unless such document is first surrendered for
cancellation. (n)
Article 1535. Subject to the provisions of this Title, the unpaid seller's
right of lien or stoppage in transitu is not affected by any sale, or other
disposition of the goods which the buyer may have made, unless the
seller has assented thereto.
If, however, a negotiable document of title has been issued for goods,
no seller's lien or right of stoppage in transitu shall defeat the right of
any purchaser for value in good faith to whom such document has been
negotiated, whether such negotiation be prior or subsequent to the
notification to the carrier, or other bailee who issued such document, of
the seller's claim to a lien or right of stoppage in transitu.
Article 1636(2) A person is insolvent within the meaning of this Title
who either has ceased to pay his debts in the ordinary course of business
or cannot pay his debts as they become due, whether insolvency
proceedings have been commenced or not.
-Right of Resale
Article 1533. Where the goods are of perishable nature, or where the
seller expressly reserves the right of resale in case the buyer should
make default, or where the buyer has been in default in the payment of
the price for an unreasonable time, an unpaid seller having a right of
lien or having stopped the goods in transitu may resell the goods. He
shall not thereafter be liable to the original buyer upon the contract of
sale or for any profit made by such resale, but may recover from the
buyer damages for any loss occasioned by the breach of the contract of
sale.
Where a resale is made, as authorized in this article, the buyer acquires
a good title as against the original buyer.
It is not essential to the validity of resale that notice of an intention to
resell the goods be given by the seller to the original buyer. But where
the right to resell is not based on the perishable nature of the goods or
upon an express provision of the contract of sale, the giving or failure
to give such notice shall be relevant in any issue involving the question
whether the buyer had been in default for an unreasonable time before
the resale was made.
It is not essential to the validity of a resale that notice of the time and
place of such resale should be given by the seller to the original buyer.
The seller is bound to exercise reasonable care and judgment in making
a resale, and subject to this requirement may make a resale either by
public or private sale. He cannot, however, directly or indirectly buy the
goods. (n)
-Right to Rescind
Article 1534. An unpaid seller having the right of lien or having stopped
the goods in transitu, may rescind the transfer of title and resume the
ownership in the goods, where he expressly reserved the right to do so
in case the buyer should make default, or where the buyer has been in
default in the payment of the price for an unreasonable time. The seller
shall not thereafter be liable to the buyer upon the contract of sale, but
may recover from the buyer damages for any loss occasioned by the
breach of the contract.
The transfer of title shall not be held to have been rescinded by an
unpaid seller until he has manifested by notice to the buyer or by some
other overt act an intention to rescind. It is not necessary that such
overt act should be communicated to the buyer, but the giving or failure
to give notice to the buyer of the intention to rescind shall be relevant
in any issue involving the question whether the buyer had been in
default for an unreasonable time before the right of rescission was
asserted. (n)
3. RECTO LAW: Sales of Movables on Installments
Article 1484. In a contract of sale of personal property the price of
which is payable in installments, the vendor may exercise any of the
following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or more
installments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more
installments. In this case, he shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to
the contrary shall be void. (1454-A-a)
Article 1485. The preceding article shall be applied to contracts
purporting to be leases of personal property with option to buy, when
the lessor has deprived the lessee of the possession or enjoyment of the
thing. (1454-A-a)
Article 1486. In the case referred to in the two preceding articles, a
stipulation that the installments or rents paid shall not be returned to
the vendee or lessee shall be valid insofar as the same may not be
unconscionable under the circumstances. (n)
4. In case of immovables
A. Anticipatory breach- Article 1591. Should the vendor
have reasonable grounds to fear the loss of immovable
property sold and its price, he may immediately sue for the
rescission of the sale.
Should such ground not exist, the provisions of article 1191 shall be
observed. (1503)
5. MACEDA LAW: Sales of residential Realty on
installments(RA6552)
REPUBLIC ACT No. 6552
AN ACT TO PROVIDE PROTECTION TO BUYERS OF REAL ESTATE
ON INSTALLMENT PAYMENTS. (Rep. Act No. 6552)
Section 1. This Act shall be known as the "Realty Installment Buyer
Act."
Section 2. It is hereby declared a public policy to protect buyers of real
estate on installment payments against onerous and oppressive
conditions.
Section 3. In all transactions or contracts involving the sale or financing
of real estate on installment payments, including residential
condominium apartments but excluding industrial lots, commercial
buildings and sales to tenants under Republic Act Numbered Thirty-eight
hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of
installments, the buyer is entitled to the following rights in case he
defaults in the payment of succeeding installments:
(a) To pay, without additional interest, the unpaid installments due
within the total grace period earned by him which is hereby fixed at the
rate of one month grace period for every one year of installment
payments made: Provided, That this right shall be exercised by the
buyer only once in every five years of the life of the contract and its
extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
per cent of the total payments made, and, after five years of
installments, an additional five per cent every year but not to exceed
ninety per cent of the total payments made: Provided, That the actual
cancellation of the contract shall take place after thirty days from receipt
by the buyer of the notice of cancellation or the demand for rescission
of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the contract shall be included
in the computation of the total number of installment payments
made.lawphi1
Section 4. In case where less than two years of installments were paid,
the seller shall give the buyer a grace period of not less than sixty days
from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the
grace period, the seller may cancel the contract after thirty days from
receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act.
Section 5. Under Section 3 and 4, the buyer shall have the right to sell
his rights or assign the same to another person or to reinstate the
contract by updating the account during the grace period and before
actual cancellation of the contract. The deed of sale or assignment shall
be done by notarial act.
Section 6. The buyer shall have the right to pay in advance any
installment or the full unpaid balance of the purchase price any time
without interest and to have such full payment of the purchase price
annotated in the certificate of title covering the property.
Section 7. Any stipulation in any contract hereafter entered into
contrary to the provisions of Sections 3, 4, 5 and 6, shall be null and
void.
Section 8. If any provision of this Act is held invalid or unconstitutional,
no other provision shall be affected thereby.lawphi1
Section 9. This Act shall take effect upon its approval.
Approved: August 26, 1972.
6. Rescission on sales of non- residential Immovables on
installments
B. ON PART OF BUYER
1. In case of Movables 1598 -1599
Article 1598. Where the seller has broken a contract to deliver specific
or ascertained goods, a court may, on the application of the buyer, direct
that the contract shall be performed specifically, without giving the seller
the option of retaining the goods on payment of damages. The judgment
or decree may be unconditional, or upon such terms and conditions as
to damages, payment of the price and otherwise, as the court may deem
just. (n)
Article 1599. Where there is a breach of warranty by the seller, the
buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach
of warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller
for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the
goods have already been received, return them or offer to return them
to the seller and recover the price or any part thereof which has been
paid.
When the buyer has claimed and been granted a remedy in anyone of
these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind
the sale if he knew of the breach of warranty when he accepted the
goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to
offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and rescinding the
sale.
Where the buyer is entitled to rescind the sale and elects to do so, he
shall cease to be liable for the price upon returning or offering to return
the goods. If the price or any part thereof has already been paid, the
seller shall be liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately after an offer
to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the
seller refuses to accept an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the goods as bailee for the
seller, but subject to a lien to secure the payment of any portion of the
price which has been paid, and with the remedies for the enforcement
of such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence
of special circumstances showing proximate damage of a greater
amount, is the difference between the value of the goods at the time of
delivery to the buyer and the value they would have had if they had
answered to the warranty. (n)
2. In case of immovables 1191 sec 23 and 24 PD957
Article 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)
Section 23. Non-Forfeiture of Payments. No installment payment made
by a buyer in a subdivision or condominium project for the lot or unit he
contracted to buy shall be forfeited in favor of the owner or developer
when the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to develop
the subdivision or condominium project according to the approved plans
and within the time limit for complying with the same. Such buyer may,
at his option, be reimbursed the total amount paid including
amortization interests but excluding delinquency interests, with interest
thereon at the legal rate.
Section 24. Failure to pay installments. The rights of the buyer in the
event of this failure to pay the installments due for reasons other than
the failure of the owner or developer to develop the project shall be
governed by Republic Act No. 6552.
Where the transaction or contract was entered into prior to the
effectivity of Republic Act No. 6552 on August 26, 1972, the defaulting
buyer shall be entitled to the corresponding refund based on the
installments paid after the effectivity of the law in the absence of any
provision in the contract to the contrary.
3. Suspension of payment 1590
Article 1590. Should the vendee be disturbed in the possession or
ownership of the thing acquired, or should he have reasonable grounds
to fear such disturbance, by a vindicatory action or a foreclosure of
mortgage, he may suspend the payment of the price until the vendor
has caused the disturbance or danger to cease, unless the latter gives
security for the return of the price in a proper case, or it has been
stipulated that, notwithstanding any such contingency, the vendee shall
be bound to make the payment. A mere act of trespass shall not
authorize the suspension of the payment of the price. (1502a)
XI. REMEDY OF RESCISSION IN SALES CONTRACTS COVERING
IMMOVABLES: Contract of sales vs. Contract to sell
A. Nature of remedy of rescission(Resolution) 1191 1479 1592
Article 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)
Article 1479. A promise to buy and sell a determinate thing for a price
certain is reciprocally demandable.
An accepted unilateral promise to buy or to sell a determinate thing for
a price certain is binding upon the promisor if the promise is supported
by a consideration distinct from the price. (1451a)
Article 1592. In the sale of immovable property, even though it may
have been stipulated that upon failure to pay the price at the time
agreed upon the rescission of the contract shall of right take place, the
vendee may pay, even after the expiration of the period, as long as no
demand for rescission of the contract has been made upon him either
judicially or by a notarial act. After the demand, the court may not grant
him a new term. (1504a)
1. Mutual restitution and forfeiture 1385
Article 1385. Rescission creates the obligation to return the things
which were the object of the contract, together with their fruits, and the
price with its interest; consequently, it can be carried out only when he
who demands rescission can return whatever he may be obliged to
restore.
Neither shall rescission take place when the things which are the object
of the contract are legally in the possession of third persons who did not
act in bad faith.
In this case, indemnity for damages may be demanded from the person
causing the loss. (1295)
B. Distinctions between contract of sale and contract to sell
1. contract of sales vs. contract to sell 1458
Article 1458. By the contract of sale one of the contracting parties
obligates himself to transfer the ownership and to deliver a determinate
thing, and the other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional. (1445a)
A. Issue of substatntial breach 1191 1234
Article 1191. The power to rescind obligations is implied in reciprocal
ones, in case one of the obligors should not comply with what is
incumbent upon him.
The injured party may choose between the fulfillment and the rescission
of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter
should become impossible.
The court shall decree the rescission claimed, unless there be just cause
authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons
who have acquired the thing, in accordance with articles 1385 and 1388
and the Mortgage Law. (1124)
Article 1234. If the obligation has been substantially performed in
good faith, the obligor may recover as though there had been a strict
and complete fulfillment, less damages suffered by the obligee. (n)
2.Cancellation of contract to sell
XII. Conditions and Warranties
1. Conditions 1545
Article 1545. Where the obligation of either party to a contract of sale
is subject to any condition which is not performed, such party may
refuse to proceed with the contract or he may waive performance of the
condition. If the other party has promised that the condition should
happen or be performed, such first mentioned party may also treat the
nonperformance of the condition as a breach of warranty.
Where the ownership in the thing has not passed, the buyer may treat
the fulfillment by the seller of his obligation to deliver the same as
described and as warranted expressly or by implication in the contract
of sale as a condition of the obligation of the buyer to perform his
promise to accept and pay for the thing. (n)
2. Conditions vs warranties
3. Express Warranties 1546
Article 1546. Any affirmation of fact or any promise by the seller
relating to the thing is an express warranty if the natural tendency of
such affirmation or promise is to induce the buyer to purchase the same,
and if the buyer purchases the thing relying thereon. No affirmation of
the value of the thing, nor any statement purporting to be a statement
of the seller's opinion only, shall be construed as a warranty, unless the
seller made such affirmation or statement as an expert and it was relied
upon by the buyer. (n)
4. Implied warranties 1547
Article 1547. In a contract of sale, unless a contrary intention appears,
there is:
(1) An implied warranty on the part of the seller that he has a right to
sell the thing at the time when the ownership is to pass, and that the
buyer shall from that time have and enjoy the legal and peaceful
possession of the thing;
(2) An implied warranty that the thing shall be free from any hidden
faults or defects, or any charge or encumbrance not declared or known
to the buyer.
This article shall not, however, be held to render liable a sheriff,
auctioneer, mortgagee, pledgee, or other person professing to sell by
virtue of authority in fact or law, for the sale of a thing in which a third
person has a legal or equitable interest. (n)
A. Seller has right to sell
B. Warranty against 1548-1560
Article 1548. Eviction shall take place whenever by a final judgment
based on a right prior to the sale or an act imputable to the vendor, the
vendee is deprived of the whole or of a part of the thing purchased.
The vendor shall answer for the eviction even though nothing has been
said in the contract on the subject.
The contracting parties, however, may increase, diminish, or suppress
this legal obligation of the vendor. (1475a)
Article 1549. The vendee need not appeal from the decision in order
that the vendor may become liable for eviction. (n)
Article 1550. When adverse possession had been commenced before
the sale but the prescriptive period is completed after the transfer, the
vendor shall not be liable for eviction. (n)
Article 1551. If the property is sold for nonpayment of taxes due and
not made known to the vendee before the sale, the vendor is liable for
eviction. (n)
Article 1552. The judgment debtor is also responsible for eviction in
judicial sales, unless it is otherwise decreed in the judgment. (n)
Article 1553. Any stipulation exempting the vendor from the obligation
to answer for eviction shall be void, if he acted in bad faith. (1476)
Article 1554. If the vendee has renounced the right to warranty in case
of eviction, and eviction should take place, the vendor shall only pay the
value which the thing sold had at the time of the eviction. Should the
vendee have made the waiver with knowledge of the risks of eviction
and assumed its consequences, the vendor shall not be liable. (1477)
Article 1555. When the warranty has been agreed upon or nothing has
been stipulated on this point, in case eviction occurs, the vendee shall
have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the
eviction, be it greater or less than the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the
party who won the suit against him;
(3) The costs of the suit which caused the eviction, and, in a proper
case, those of the suit brought against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale
was made in bad faith. (1478)
Article 1556. Should the vendee lose, by reason of the eviction, a part
of the thing sold of such importance, in relation to the whole, that he
would not have bought it without said part, he may demand the
rescission of the contract; but with the obligation to return the thing
without other encumbrances that those which it had when he acquired
it.
He may exercise this right of action, instead of enforcing the vendor's
liability for eviction.
The same rule shall be observed when two or more things have been
jointly sold for a lump sum, or for a separate price for each of them, if
it should clearly appear that the vendee would not have purchased one
without the other. (1479a)
Article 1557. The warranty cannot be enforced until a final judgment
has been rendered, whereby the vendee loses the thing acquired or a
part thereof. (1480)
Article 1558. The vendor shall not be obliged to make good the proper
warranty, unless he is summoned in the suit for eviction at the instance
of the vendee. (1481a)
Article 1559. The defendant vendee shall ask, within the time fixed in
the Rules of Court for answering the complaint, that the vendor be made
a co-defendant. (1482a)
Article 1560. If the immovable sold should be encumbered with any
non-apparent burden or servitude, not mentioned in the agreement, of
such a nature that it must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the rescission of
the contract, unless he should prefer the appropriate indemnity. Neither
right can be exercised if the non-apparent burden or servitude is
recorded in the Registry of Property, unless there is an express warranty
that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution of the deed, the
vendee may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages
within an equal period, to be counted from the date on which he
discovered the burden or servitude. (1483a)
C. Warranty against non-apparent servitudes 1560
Article 1560. If the immovable sold should be encumbered with any
non-apparent burden or servitude, not mentioned in the agreement, of
such a nature that it must be presumed that the vendee would not have
acquired it had he been aware thereof, he may ask for the rescission of
the contract, unless he should prefer the appropriate indemnity. Neither
right can be exercised if the non-apparent burden or servitude is
recorded in the Registry of Property, unless there is an express warranty
that the thing is free from all burdens and encumbrances.
Within one year, to be computed from the execution of the deed, the
vendee may bring the action for rescission, or sue for damages.
One year having elapsed, he may only bring an action for damages
within an equal period, to be counted from the date on which he
discovered the burden or servitude. (1483a)
D. Warranty against hidden defects 1561-1580
Article 1561. The vendor shall be responsible for warranty against the
hidden defects which the thing sold may have, should they render it
unfit for the use for which it is intended, or should they diminish its
fitness for such use to such an extent that, had the vendee been aware
thereof, he would not have acquired it or would have given a lower price
for it; but said vendor shall not be answerable for patent defects or those
which may be visible, or for those which are not visible if the vendee is
an expert who, by reason of his trade or profession, should have known
them. (1484a)
Article 1562. In a sale of goods, there is an implied warranty or
condition as to the quality or fitness of the goods, as follows:
(1) Where the buyer, expressly or by implication, makes known to the
seller the particular purpose for which the goods are acquired, and it
appears that the buyer relies on the seller's skill or judgment (whether
he be the grower or manufacturer or not), there is an implied warranty
that the goods shall be reasonably fit for such purpose;
(2) Where the goods are brought by description from a seller who deals
in goods of that description (whether he be the grower or manufacturer
or not), there is an implied warranty that the goods shall be of
merchantable quality. (n)
Article 1563. In the case of contract of sale of a specified article under
its patent or other trade name, there is no warranty as to its fitness for
any particular purpose, unless there is a stipulation to the contrary. (n)
Article 1564. An implied warranty or condition as to the quality or
fitness for a particular purpose may be annexed by the usage of trade.
(n)
Article 1565. In the case of a contract of sale by sample, if the seller
is a dealer in goods of that kind, there is an implied warranty that the
goods shall be free from any defect rendering them unmerchantable
which would not be apparent on reasonable examination of the sample.
(n)
Article 1566. The vendor is responsible to the vendee for any hidden
faults or defects in the thing sold, even though he was not aware
thereof.
This provision shall not apply if the contrary has been stipulated, and
the vendor was not aware of the hidden faults or defects in the thing
sold. (1485)
Article 1567. In the cases of articles 1561, 1562, 1564, 1565 and 1566,
the vendee may elect between withdrawing from the contract and
demanding a proportionate reduction of the price, with damages in
either case. (1486a)
Article 1568. If the thing sold should be lost in consequence of the
hidden faults, and the vendor was aware of them, he shall bear the loss,
and shall be obliged to return the price and refund the expenses of the
contract, with damages. If he was not aware of them, he shall only
return the price and interest thereon, and reimburse the expenses of
the contract which the vendee might have paid. (1487a)
Article 1569. If the thing sold had any hidden fault at the time of the
sale, and should thereafter be lost by a fortuitous event or through the
fault of the vendee, the latter may demand of the vendor the price which
he paid, less the value which the thing had when it was lost.
If the vendor acted in bad faith, he shall pay damages to the vendee.
(1488a)
Article 1570. The preceding articles of this Subsection shall be
applicable to judicial sales, except that the judgment debtor shall not be
liable for damages. (1489a)
Article 1571. Actions arising from the provisions of the preceding ten
articles shall be barred after six months, from the delivery of the thing
sold. (1490)
Article 1572. If two or more animals are sold together, whether for a
lump sum or for a separate price for each of them, the redhibitory defect
of one shall only give rise to its redhibition, and not that of the others;
unless it should appear that the vendee would not have purchased the date of purchase, unless
sound animal or animals without the defective one. otherwise agreed upon. The
The latter case shall be presumed when a team, yoke pair, or set is report shall contain, among
bought, even if a separate price has been fixed for each one of the others, the date of purchase,
animals composing the same. (1491) model of the product bought,
Article 1573. The provisions of the preceding article with respect to its serial number, name and
the sale of animals shall in like manner be applicable to the sale of other address of the buyer. The
things. (1492) report made in accordance
Article 1574. There is no warranty against hidden defects of animals with this provision shall be
sold at fairs or at public auctions, or of live stock sold as condemned. equivalent to a warranty
(1493a) registration with the
Article 1575. The sale of animals suffering from contagious diseases manufacturer, producer, or
shall be void. importer. Such registration is
A contract of sale of animals shall also be void if the use or service for sufficient to hold the
which they are acquired has been stated in the contract, and they are manufacturer, producer, or
found to be unfit therefor. (1494a) importer liable, in appropriate
Article 1576. If the hidden defect of animals, even in case a cases, under its warranty.
professional inspection has been made, should be of such a nature that 2) Failure to make or send report. Failure of the distributor to make
expert knowledge is not sufficient to discover it, the defect shall be the report or send them the
considered as redhibitory. form required by the
But if the veterinarian, through ignorance or bad faith should fail to manufacturer, producer, or
discover or disclose it, he shall be liable for damages. (1495) importer shall relieve the latter
Article 1577. The redhibitory action, based on the faults or defects of of its liability under the
animals, must be brought within forty days from the date of their warranty: Provided, however,
delivery to the vendee. That the distributor who failed
This action can only be exercised with respect to faults and defects to comply with its obligation to
which are determined by law or by local customs. (1496a) send the sales reports shall be
Article 1578. If the animal should die within three days after its personally liable under the
purchase, the vendor shall be liable if the disease which cause the death warranty. For this purpose, the
existed at the time of the contract. (1497a) manufacturer shall be
Article 1579. If the sale be rescinded, the animal shall be returned in obligated to make good the
the condition in which it was sold and delivered, the vendee being warranty at the expense of the
answerable for any injury due to his negligence, and not arising from distributor.
the redhibitory fault or defect. (1498) 3) Retail. The retailer shall be subsidiarily liable under the warranty in
Article 1580. In the sale of animals with redhibitory defects, the case of failure of both the
vendee shall also enjoy the right mentioned in article 1567; but he must manufacturer and distributor
make use thereof within the same period which has been fixed for the to honor the warranty. In such
exercise of the redhibitory action. (1499) case, the retailer shall shoulder
the expenses and costs
E. Additional warranties for consumer products arts 68, necessary to honor the
consumer act, RA 7394 - Article 68. Additional Provisions on warranty. Nothing therein shall
Warranties. In addition to the Civil Code provisions on sale with prevent the retailer from
warranties, the following provisions shall govern the sale of proceeding against the
consumer products with warranty: distributor or manufacturer.
a) Terms of express warranty. Any seller or manufacturer who gives 4) Enforcement of warranty or guarantee. The warranty rights can be
an express warranty shall: enforced by presentment of a
1) set forth the terms of warranty in clear and readily understandable claim. To this end, the
language and clearly identify purchaser needs only to
himself as the warrantor; present to the immediate seller
2) identify the party to whom the warranty is extended; either the warranty card of the
3) state the products or parts covered; official receipt along with the
4) state what the warrantor will do in the event of a defect, malfunction product to be serviced or
of failure to conform to the returned to the immediate
written warranty and at whose seller. No other documentary
expense; requirement shall be
5) state what the consumer must do to avail of the rights which accrue demanded from the purchaser.
to the warranty; and If the immediate seller is the
6) stipulate the period within which, after notice of defect, malfunction manufacturer's factory or
or failure to conform to the showroom, the warranty shall
warranty, the warrantor will immediately be honored. If the
perform any obligation under product was purchased from a
the warranty. distributor, the distributor shall
b) Express warranty operative from moment of sale. All written likewise immediately honor the
warranties or guarantees issued by a warranty. In the case of a
manufacturer, producer, or importer shall be retailer other than the
operative from the moment of sale. distributor, the former shall
1) Sales Report. All sales made by distributors of products covered by take responsibility without cost
this Article shall be reported to to the buyer of presenting the
the manufacturer, producer, or warranty claim to the
importer of the product sold distributor in the consumer's
within thirty (30) days from behalf.
5) Record of purchases. Distributors and retailers covered by this
Article shall keep a record of all
purchases covered by a
warranty or guarantee for such
period of time corresponding
to the lifetime of the product's
respective warranties or
guarantees.
6) Contrary stipulations null and void. All covenants, stipulations or
agreements contrary to the
provisions of this Article shall
be without legal effect.
c) Designation of warranties. A written warranty shall clearly and
conspicuously designate such warranty as:
1) "Full warranty" if the written warranty meets the minimum
requirements set forth in
paragraph (d); or
2) "Limited warranty" if the written warranty does not meet such
minimum requirements.
d) Minimum standards for warranties. For the warrantor of a consumer
product to meet the minimum standards for
warranty, he shall:
1) remedy such consumer product within a reasonable time and without
charge in case of a defect,
malfunction or failure to
conform to such written
warranty;
2) permit the consumer to elect whether to ask for a refund or
replacement without charge of
such product or part, as the
case may be, where after
reasonable number of
attempts to remedy the defect
or malfunction, the product
continues to have the defect or
to malfunction.
The warrantor will not be required to perform the above duties if he can
show that the defect, malfunction or failure
to conform to a written warranty was caused
by damage due to unreasonable use thereof.
e) Duration of warranty. The seller and the consumer may stipulate
the period within which the express warranty
shall be enforceable. If the implied warranty
on merchantability accompanies an express
warranty, both will be of equal duration.
Any other implied warranty shall endure not less than sixty (60) days
nor more than one (1) year following the
sale of new consumer products.
f) Breach of warranties. 1) In case of breach of express warranty, the
consumer may elect to have the goods
repaired or its purchase price refunded by
the warrantor. In case the repair of the
product in whole or in part is elected, the
warranty work must be made to conform to
the express warranty within thirty (30) days
by either the warrantor or his representative.
The thirty-day period, however, may be
extended by conditions which are beyond
the control of the warrantor or his
representative. In case the refund of the
purchase price is elected, the amount
directly attributable to the use of the
consumer prior to the discovery of the non-
conformity shall be deducted.
2) In case of breach of implied warranty, the consumer may retain in
the goods and recover
damages, or reject the goods,
cancel and contract and
recover from the seller so
much of the purchase price as
has been paid, including
damages.
5. Effects of warranties
6. Effects of waivers
7. Buyers option in case of breach of warranty 1599
Article 1599. Where there is a breach of warranty by the seller, the
buyer may, at his election:
(1) Accept or keep the goods and set up against the seller, the breach
of warranty by way of recoupment in diminution or extinction of the
price;
(2) Accept or keep the goods and maintain an action against the seller
for damages for the breach of warranty;
(3) Refuse to accept the goods, and maintain an action against the seller
for damages for the breach of warranty;
(4) Rescind the contract of sale and refuse to receive the goods or if the
goods have already been received, return them or offer to return them
to the seller and recover the price or any part thereof which has been
paid.
When the buyer has claimed and been granted a remedy in anyone of
these ways, no other remedy can thereafter be granted, without
prejudice to the provisions of the second paragraph of article 1191.
Where the goods have been delivered to the buyer, he cannot rescind
the sale if he knew of the breach of warranty when he accepted the
goods without protest, or if he fails to notify the seller within a
reasonable time of the election to rescind, or if he fails to return or to
offer to return the goods to the seller in substantially as good condition
as they were in at the time the ownership was transferred to the buyer.
But if deterioration or injury of the goods is due to the breach or
warranty, such deterioration or injury shall not prevent the buyer from
returning or offering to return the goods to the seller and rescinding the
sale.
Where the buyer is entitled to rescind the sale and elects to do so, he
shall cease to be liable for the price upon returning or offering to return
the goods. If the price or any part thereof has already been paid, the
seller shall be liable to repay so much thereof as has been paid,
concurrently with the return of the goods, or immediately after an offer
to return the goods in exchange for repayment of the price.
Where the buyer is entitled to rescind the sale and elects to do so, if the
seller refuses to accept an offer of the buyer to return the goods, the
buyer shall thereafter be deemed to hold the goods as bailee for the
seller, but subject to a lien to secure the payment of any portion of the
price which has been paid, and with the remedies for the enforcement
of such lien allowed to an unpaid seller by article 1526.
(5) In the case of breach of warranty of quality, such loss, in the absence
of special circumstances showing proximate damage of a greater
amount, is the difference between the value of the goods at the time of
delivery to the buyer and the value they would have had if they had
answered to the warranty. (n)
XIII. EXTINGUISHMENT OF SALE
A.In general
Article 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation.
Other causes of extinguishment of obligations, such as annulment,
rescission, fulfillment of a resolutory condition, and prescription, are
governed elsewhere in this Code
Article 1600. Sales are extinguished by the same causes as all other
obligations, by those stated in the preceding articles of this Title, and by
conventional or legal redemption.
B.Conventional Redemption Article 1617. If at the time of the execution of the sale there should
1.Definition be on the land, visible or growing fruits, there shall be no reimbursement
for or prorating of those existing at the time of redemption, if no
Article 1601. Conventional redemption shall take place when the
indemnity was paid by the purchaser when the sale was executed.
vendor reserves the right to repurchase the thing sold, with the
obligation to comply with the provisions of article 1616 and other Should there have been no fruits at the time of the sale and some exist
stipulations which may have been agreed upon. (1507) ARTICLE 1602. at the time of redemption, they shall be prorated between the
The contract shall be presumed to be an equitable mortgage, in any of redemptioner and the vendee, giving the latter the part corresponding
the following cases: to the time he possessed the land in the last year, counted from the
anniversary of the date of the sale.
(1) When the price of a sale with right to
repurchase is unusually inadequate;
8.Effect when No Redemption Made: Consolidation
(2) When the vendor remains in possession as Article 1607. In case of real property, the consolidation of ownership
lessee or otherwise; in the vendee by virtue of the failure of the vendor to comply with the
provisions of article 1616 shall not be recorded in the Registry of
(3) When upon or after the expiration of the right
Property without a judicial order, after the vendor has been duly heard.
to repurchase another instrument extending the
period of redemption or granting a new period is
9.Equitable Mortgage
executed;
ARTICLE 1602. The contract shall be presumed to be an equitable
(4) When the purchaser retains for himself a part
mortgage, in any of the following cases:
of the purchase price;
(1) When the price of a sale with right to
(5) When the vendor binds himself to pay the taxes
repurchase is unusually inadequate;
on the thing sold;
(2) When the vendor remains in possession as
(6) In any other case where it may be fairly inferred
lessee or otherwise;
that the real intention of the parties is that the
transaction shall secure the payment of a debt or (3) When upon or after the expiration of the right
the performance of any other obligation. to repurchase another instrument extending the
period of redemption or granting a new period is
In any of the foregoing cases, any money, fruits, or other benefit to be
executed;
received by the vendee as rent or otherwise shall be considered as
interest which shall be subject to the usury laws. (4) When the purchaser retains for himself a part
2.Redemption period of the purchase price;
3.Situation prior to redemption
(5) When the vendor binds himself to pay the taxes
4.Who can Redeem
on the thing sold;
Article 1611. In a sale with a right to repurchase, the vendee of a part
(6) In any other case where it may be fairly inferred
of an undivided immovable who acquires the whole thereof in the case
that the real intention of the parties is that the
of article 498, may compel the vendor to redeem the whole property, if
transaction shall secure the payment of a debt or
the latter wishes to make use of the right of redemption. (1513)
the performance of any other obligation.
Article 1612. If several persons, jointly and in the same contract,
In any of the foregoing cases, any money, fruits, or other benefit to be
should sell an undivided immovable with a right of repurchase, none of
received by the vendee as rent or otherwise shall be considered as
them may exercise this right for more than his respective share.
interest which shall be subject to the usury laws. (n)
The same rule shall apply if the person who sold an immovable alone
Article 1603. In case of doubt, a contract purporting to be a sale with
has left several heirs, in which case each of the latter may only redeem
right to repurchase shall be construed as an equitable mortgage. (n)
the part which he may have acquired. (1514)
Article 1604. The provisions of article 1602 shall also apply to a
Article 1613. In the case of the preceding article, the vendee may
contract purporting to be an absolute sale.
demand of all the vendors or co-heirs that they come to an agreement
upon the repurchase of the whole thing sold; and should they fail to do
a.Badges of Equitable Mortgage Art 1602
so, the vendee cannot be compelled to consent to a partial redemption.
(1515)
b. Remedies allowed for Equitable Mortgage
Article 1614. Each one of the co-owners of an undivided immovable Art 1602
who may have sold his share separately, may independently exercise Article 1605. In the cases referred to in articles 1602 and 1604, the
the right of repurchase as regards his own share, and the vendee cannot apparent vendor may ask for the reformation of the instrument.
compel him to redeem the whole property.
c.Pactum Commissorium
5.How redemption Effected Article 2088. The creditor cannot appropriate the things given by way
of pledge or mortgage, or dispose of them. Any stipulation to the
Article 1616. The vendor cannot avail himself of the right of
contrary is null and void.
repurchase without returning to the vendee the price of the sale, and in
e.Final chance to redeem in Mistaken Equitable Mortgage
addition:
Article 1606. The right referred to in article 1601, in the absence of an
(1) The expenses of the contract, and any other
express agreement, shall last four years from the date of the contract.
legitimate payments made by reason of the sale;
Should there be an agreement, the period cannot exceed ten years.
(2) The necessary and useful expenses made on the thing sold.
However, the vendor may still exercise the right to repurchase within
6.Redemption price thirty days from the time final judgment was rendered in a civil action
Art 1616 on the basis that the contract was a true sale with right to repurchase.
7.Fruits
C.LEGAL REDEMPTION
1.Definition
Article 1619. Legal redemption is the right to be subrogated, upon the
same terms and conditions stipulated in the contract, in the place of one
who acquires a thing by purchase or dation in payment, or by any other
transaction whereby ownership is transmitted by onerous title.
2.Legal Redemption rights under the civil code
a.Among Co-Heirs
Article 1088. Should any of the heirs sell his hereditary rights to a
stranger before the partition, any or all of the co-heirs may be
subrogated to the rights of the purchaser by reimbursing him for the
price of the sale, provided they do so within the period of one month
from the time they were notified in writing of the sale by the vendor.
b.Among Co-owners
Article 1620. A co-owner of a thing may exercise the right of
redemption in case the shares of all the other co-owners or of any of
them, are sold to a third person. If the price of the alienation is grossly
excessive, the redemptioner shall pay only a reasonable one.
Should two or more co-owners desire to exercise the right of
redemption, they may only do so in proportion to the share they may
respectively have in the thing owned in common.
c.Distinguishing between Right of Redemption of Co-heris and co-
owners
d.Among Adjoining Owners
Article 1621. The owners of adjoining lands shall also have the right
of redemption when a piece of rural land, the area of which does not
exceed one hectare, is alienated, unless the grantee does not own any
rural land.
This right is not applicable to adjacent lands which are separated by
brooks, drains, ravines, roads and other apparent servitudes for the
benefit of other estates.
If two or more adjoining owners desire to exercise the right of
redemption at the same time, the owner of the adjoining land of smaller
area shall be preferred; and should both lands have the same area, the
one who first requested the redemption. (1523a)
ARTICLE 1622. Whenever a piece of urban land which is so small and
so situated that a major portion thereof cannot be used for any practical
purpose within a reasonable time, having been bought merely for
speculation, is about to be re-sold, the owner of any adjoining land has
a right of pre-emption at a reasonable price.
If the re-sale has been perfected, the owner of the adjoining land shall
have a right of redemption, also at a reasonable price.
When two or more owners of adjoining lands wish to exercise the right
of pre-emption or redemption, the owner whose intended use of the
land in question appears best justified shall be preferred.
e.Sale of Credit in Litigation
ARTICLE 1634. When a credit or other incorporeal right in litigation is
sold, the debtor shall have a right to extinguish it by reimbursing the
assignee for the price the latter paid therefor, the judicial costs incurred
by him, and the interest on the price from the day on which the same
was paid.
A credit or other incorporeal right shall be considered in litigation from
the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the
assignee demands payment from him.
3.When period of Legal redemption begins
Article 1623. The right of legal pre-emption or redemption shall not be
exercised except within thirty days from the notice in writing by the
prospective vendor, or by the vendor, as the case may be. The deed of
sale shall not be recorded in the Registry of Property, unless
accompanied by an affidavit of the vendor that he has given written
notice thereof to all possible redemptioners.
The right of redemption of co-owners excludes that of adjoining owners.
4.Other Legal Redemption rights
a.Redemption in Patents
CA 141
Section119. Every conveyance of land acquired under the free patent or
homestead provisions, when proper, shall be subject to repurchase by
the applicant, his widow, or legal heirs, within a period of five years from
the date of the conveyance.
b.Redemption in Tax sales
NIRC of 1997
SEC. 215. Forfeiture to Government for Want of Bidder. - In
case there is no bidder for real property exposed for sale as
herein above provided or if the highest bid is for an amount
insufficient to pay the taxes, penalties and costs, the Internal
Revenue Officer conducting the sale shall declare the property
forfeited to the Government in satisfaction of the claim in
question and within two (2) days thereafter, shall make a
return of his proceedings and the forfeiture which shall be
spread upon the records of his office. It shall be the duty of the
Register of Deeds concerned, upon registration with his office
of any such declaration of forfeiture, to transfer the title of the
property forfeited to the Government without the necessity of
an order from a competent court.
Within one (1) year from the date of such forfeiture, the
taxpayer, or any one for him, may redeem said property by
paying to the Commissioner or the latter's Revenue Collection
Officer the full amount of the taxes and penalties, together with
interest thereon and the costs of sale, but if the property be not
thus redeemed, the forfeiture shall become absolute.
c.Redemption by Judgement Debtor
Rules of civil procedure, Rule 39
Section 27. Who may redeem real property so sold. Real property
sold as provided in the last preceding section, or any part thereof sold
separately, may be redeemed in the manner hereinafter provided, by
the following persons:
(a) The judgment obligor; or his successor in interest in the
whole or any part of the property;
(b) A creditor having a lien by virtue of an attachment,
judgment or mortgage on the property sold, or on some part
thereof, subsequent to the lien under which the property was
sold. Such redeeming creditor is termed a redemptioner.
(29a)
Section 28. Time and manner of, and amounts payable on, successive
redemptions; notice to be given and filed. The judgment obligor, or
redemptioner, may redeem the property from the purchaser, at any time
within one (1) year from the date of the registration of the certificate of
sale, by paying the purchaser the amount of his purchase, with the per
centum per month interest thereon in addition, up to the time of
redemption, together with the amount of any assessments or taxes
which the purchaser may have paid thereon after purchase, and interest
on such last named amount at the same rate; and if the purchaser be
also a creditor having a prior lien to that of the redemptioner, other than
the judgment under which such purchase was made, the amount of such
other lien, with interest.
Property so redeemed may again be redeemed within sixty (60) days
after the last redemption upon payment of the sum paid on the last
redemption, with two per centum thereon in addition and the amount
of any assessments or taxes which the last redemptioner may have paid
thereon after redemption by him, with interest on such last named
amount, and in addition, the amount of any liens held by said last
redemptioner prior to his own, with interest. The property may be again,
and as often as a redemptioner is so disposed, redeemed from any
previous redemptioner within sixty (60) days after the last redemption,
on paying the sum paid on the last previous redemption, with two per
centum thereon in addition, and the amounts of any assessments or
taxes which the last previous redemptioner paid after the redemption
thereon, with interest thereon, and the amount of any liens held by the
last redemptioner prior to his own, with interest.
Written notice of any redemption must be given to the officer who made
the sale and a duplicate filed with the registry of deeds of the place, and
if any assessments or taxes are paid by the redemptioner or if he has or
acquires any lien other than that upon which the redemption was made,
notice thereof must in like manner be given to the officer and filed with
the registry of deeds; if such notice be not filed, the property may be
redeemed without paying such assessments, taxes, or liens.
d.Redemption in Extrajudicial Foreclosure
Act3135 Sec. 6. In all cases in which an extrajudicial sale is made under
the special power hereinbefore referred to, the debtor, his successors in
interest or any judicial creditor or judgment creditor of said debtor, or
any person having a lien on the property subsequent to the mortgage
or deed of trust under which the property is sold, may redeem the same
at any time within the term of one year from and after the date of the
sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six,
inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act.
e. Redemption in judicial foreclosure of mortgage
RA 8791 Section 47. Foreclosure of Real Estate Mortgage. - In the
event of foreclosure, whether judicially or extra-judicially, of any
mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property
has been sold for the full or partial payment of his obligation shall have
the right within one year after the sale of the real estate, to redeem the
property by paying the amount due under the mortgage deed, with
interest thereon at rate specified in the mortgage, and all the costs and
expenses incurred by the bank or institution from the sale and custody
of said property less the income derived therefrom. However, the
purchaser at the auction sale concerned whether in a judicial or extra-
judicial foreclosure shall have the right to enter upon and take
possession of such property immediately after the date of the
confirmation of the auction sale and administer the same in accordance
with law. Any petition in court to enjoin or restrain the conduct of
foreclosure proceedings instituted pursuant to this provision shall be
given due course only upon the filing by the petitioner of a bond in an
amount fixed by the court conditioned that he will pay all the damages
which the bank may suffer by the enjoining or the restraint of the
foreclosure proceeding. Notwithstanding Act 3135, juridical persons
whose property is being sold pursuant to an extrajudicial foreclosure,
shall have the right to redeem the property in accordance with this
provision until, but not after, the registration of the certificate of
foreclosure sale with the applicable Register of Deeds which in no case
shall be more than three (3) months after foreclosure, whichever is
earlier. Owners of property that has been sold in a foreclosure sale prior
to the effectivity of this Act shall retain their redemption rights until their
expiration.
f. Redemption in Foreclosure by rural banks
REPUBLIC ACT NO. 720 - AN ACT PROVIDING FOR THE
CREATION, ORGANIZATION AND OPERATION OF RURAL
BANKS, AND FOR OTHER PURPOSES
Section 1. The short title of this Act shall be "Rural Banks' Act".
Sec. 2. It shall be the declared policy of Congress. To promote and
expand the rural economy in an orderly and effective manner by
providing the people of the rural communities with the means of
facilitating and improving their productive activities, and to encourage
cooperatives. Toward this end, the Government shall encourage and
assist in the establishment of a system of rural banks which will place
within easy reach and access of the people credit facilities on
reasonable terms. The Department of Agriculture and Natural
Resources, the Department of Commerce and Industry, and other
appropriate agencies or instrumentalities of the Government shall, in
cooperation with the Rural Bank, provide advice on business or farm
management and proper use of credit for production and marketing.
Sec. 3. In furtherance of this policy, the Monetary Board of the
Central Bank of the Philippines, shall formulate the necessary rules and
regulations governing the establishment and operation of Rural Banks
for the purpose of providing adequate credit facilities to small farmers
and merchants, and to supervise the operation of such banks.
Sec. 4. No Rural Bank shall be operated without a Certificate of
Authority of the Monetary Board of the Central Bank. Rural Banks shall
be organized in the form of stock corporations. Duly established
cooperatives may organized Rural Banks and/or subscribe to the shares
of stock of any Rural Bank. At least sixty per cent of the capital stock
of any Rural Bank shall be owned and held by citizens of the Philippines:
Provided, however, That if said subscription of private shareholders to
the capital stock of a Rural Bank cannot be secured or is not available,
the Rehabilitation Finance Corporation, on representation of the said
private shareholders and upon approval of the Monetary Board of the
Central Bank shall subscribe to the capital stock of such rural bank,
which shall be paid in full at the time of subscription, in an amount
equal to the fully paid subscribed capital of the private shareholders:
Provided, further, That such shares of stock subscribed by the
Rehabilitation Finance Corporation may be sold at any time at par to
private individuals who are citizens of the Philippines: Provided, finally,
That in the sale of the shares of stock subscribed by the Rehabilitation
Finance Corporation, the registered stockholders shall be given at least
six months option within which to purchase the same in proportion to
their respective holdings, but in the absence of such buyer, preference,
however, shall be given to residents of the locality or province where
the Rural Bank is located. All members of the Board of Directors of the
Rural Banks shall be citizens of the Philippines.
Sec. 5. Loans or advances extended by Rural Banks, organized and
operated under this Act, shall be primarily for the purpose of meeting
the normal credit needs of any small farmer or farm family owning or
cultivating, in the aggregate, not more than fifty hectares of land
dedicated to agricultural production, as well as the normal credit needs
of cooperatives and small merchants. For the purposes of this Act, a
small merchant shall be one whose capital investment does not exceed
twenty-five thousand pesos. In the granting of loans, the Rural Bank
shall give preference to the application of farmers whose cash
requirements are small: Provided, however, That in the case of loans
secured by real estate no Torrens title shall be required.
Sec. 6. With the view to insuring balanced rural economic growth and
expansion, Rural Banks may, within limits and conditions fixed by the
Monetary Board, devote a portion of their loanable funds to meeting
the normal credit needs of small business enterprises whose capital
investment does not exceed twenty-five thousand pesos and of
essential rural enterprises or industries, other than those which are
strictly agricultural in nature.
Sec. 7. To provide supplemental capital to any Rural Bank until it has
accumulated enough capital of its own or stimulate private investment
in Rural Banks, the Rehabilitation Finance Corporation shall, upon
certification of the Monetary Board of the existence of such need,
subscribe to capital stock of any Rural Bank from time to time in an
amount equal to but not exceeding the total equity investment of the
private shareholders: Provided, however, That shares of stock issued
to the Rehabilitation Finance Corporation, pursuant to this section, may
at any time be paid off at par and retired in whole in part if, in the
opinion of the Monetary Board, the Rural Bank has accumulated
enough capital strength to permit retirement of such shares; or if an
offer is received from private sources, to replace the equity investments
of the Rehabilitation Finance Corporation with an equivalent investment
or more in the common stock of such Bank. In case of such retirement
of stock or replacement of equity investments of the Rehabilitation
Finance Corporation, the registered private shareholders of the Rural
Bank shall be given the right of preemption in proportion to their
respective holdings.
Stock held by the Rehabilitation Finance Corporation, under the terms
of this section, shall be made preferred only as to assets upon
liquidation and without the power to vote and shall share in dividend
distributions without preference: Provided, however, That if such stock
of the Rehabilitation Finance Corporation is sold to private
shareholders, the same shall thereupon have the right to vote.
Sec. 8. The Rehabilitation Finance Corporation is authorized to obtain
from the "Counterpart Fund" and "Special Account" authorized under
Republic Act Numbered Six hundred and four such amounts as it may
require, but not more than ten million pesos, for the purpose of
subscribing to the shares of stock of Rural Banks, and of granting loans
to such banks as provided in section twelve of this Act. All funds
obtained by the Rehabilitation Finance Corporation from the
"Counterpart Fund" and "Special Account" shall constitute a revolving
fund and together with the interest which will accrue thereon will be
used solely as provided for in this section.
Sec. 9. Stock preferred as to assets upon liquidation shall be issued
only to represent the contributions to capital stock of the Rural Bank
by the Government through the Rehabilitation Finance Corporation. If
there are no such public investments, only one class of stock shall be
issued by any Rural Bank. The powers of the Monetary Board over Rural
Banks shall extend to prescribing the amount, value and class of stock
issued by any Rural Bank, organized under this Act.
Section 10. The power to supervise the operation of any Rural Bank
by the Monetary Board of the Central Bank, as herein indicated, shall
consist in placing limits to the maximum credited allowed any individual
borrower; in prescribing the interest rate; in determining the loan
period and loan procedures; in indicating the manner in which technical
assistance shall be extended to Rural Banks; in imposing a uniform
accounting system and manner of keeping the accounts and records of
the Rural Banks; in undertaking regular credit examination of the Rural
Banks; in instituting periodic surveys of loan and lending procedures,
audits, test check of cash and other transactions of the Rural Banks; in
conducting training courses of personnel of Rural Banks; and, in
general, in supervising the business operation of the Rural Bank.
Section 11. With the written permission of the Monetary Board of the
Central Bank, any Rural Bank may:
(a) accept savings and time deposits;
(b) open current or checking accounts. The Monetary Board shall
determine when a Rural Bank may be authorized to open current or
checking accounts;
(c) act as a correspondent for other financial institutions;
(d) act as a collection agent;
(e) rediscount with the Philippine National Bank or Rehabilitation
Finance Corporation or other banks and their branches and agencies.
The Central Bank shall specify the nature of paper deemed acceptable
for rediscount, as well as the rediscount rate to be charged by any of
these institutions.
Section 12. The Rehabilitation Finance Corporation shall, upon
request of the Monetary Board, extend to a Rural Bank a loan or loans
repayable in not more than ten years, with interest at the rate of two
per cent per annum, against securities which may be offered by any
stockholder or stockholders of the Rural Bank and which the Monetary
Board may consider adequate: Provided
(a) That the Monetary Board is convinced that the resources of the
Rural Bank are inadequate to meet the legitimate credit requirements
of the locality wherein the Rural Bank is established;
(b) That there is a dearth of private capital in the said locality; and
(c) That it is not possible for the stockholders of the Rural Bank to
increase the paid-up capital thereof.
Section 13. In an emergency or when a financial crisis is imminent,
the Central Bank may give a loan to any Rural Bank against assets of
the Rural Bank which may be considered acceptable by a concurrent
vote of at least five members of the Monetary Board.
Section 14. All Rural Banks created and organized under the
provisions of this Act, with assets not exceeding five hundred thousand
pesos shall be exempt from all taxes of whatever nature a well as
charges and fees required in filing articles of incorporation.
Section 15. The Central Bank of the Philippines shall extend technical
assistance to any Rural Bank in the process of organization or during
the course of operations whenever it is requested to do so or whenever
the Monetary Board deems it necessary to preserve, protect and
promote the objectives of this Act: Provided, however, That said
assistance shall be without cost or obligation on the part of the Rural
Bank.
Section 16. Any justice of the peace, in his capacity as notary ex
officio, shall render service free of charge to any person applying for a
loan not exceeding two thousand pesos from the Rural Bank either in
administering the oath or in the acknowledgment of instruments
relative to said loan.
Section 17. Any register of deeds shall accept for registration, free of
charge, any instrument relative to a loan not exceeding two thousand
pesos made to any person by the Rural Bank.
Section 18. Rural Banks organized under this Act shall be exempt
from the obligation of contributing for the maintenance of the
Department of Supervision and Examination provided in section
twenty-eight of Republic Act Numbered Two hundred and sixty-five.
Section 19. Every individual acting as officer or employee of a Rural
Bank and handling funds or securities amounting to one thousand
pesos or more, in any one year, shall be covered by an adequate bond
as determined by the Monetary Board; and the by-laws of the Rural
Bank may also provide for bonding of other employees or officers of
Rural Banks.
Sec. 20. For the purpose of carrying out the objectives of this Act,
the Central Bank is authorized to require the services and facilities of
any Department or instrumentality of the Government or any officer or
employee of any such Department or Government instrumentality.
Sec. 21. Rural Banks organized and operated under the provisions of
this Act shall act as agent of the Philippine National Bank and the
Rehabilitation Finance Corporation in places where the latter have no
branch or agency.
Sec. 22. A fine of not more than two thousand pesos or imprisonment
for not more than one year, or both, at the discretion of the court, shall
be imposed upon:
1. Any officer, employee, or agent of a Rural Bank who shall
(a) make false entries in any bank report or statement thereby Sec. 26. If any provision or section of this Act or the application
affecting the financial interest of, or causing damage to, the bank or thereof to any person or circumstances, is held invalid, the other
any person; or provisions or sections of this Act, and the application of such provision
or section to other persons or circumstances, shall not be affected
(b) without order of a court of competent jurisdiction disclose any thereby.
information relative to the funds or properties in the custody of the
bank belonging to private individuals, corporations, or any other entity; Sec. 27. The provisions of Republic Acts Numbered Two hundred as
or they are applicable and not in conflict with any provision of this Act,
are hereby made a part of this Act.
(c) accept gifts, fees or commission or any other form of
remuneration in connection with the approval of a loan from said bank; Sec. 28. This Act shall take effect upon its approval.
or

(d) overvalue ord in overvaluing any security for the purpose of

influencing in any way the action of the bank on any loan; or

(e) appear and sign as guarantor, indorser or surety for loans granted
by the bank.

2. Any applicant for a loan from, or borrower of a Rural Bank who

shall

(a) misuse, misapply, or divert the proceeds of the loan obtained by

him from its declared purpose; or

(b) fraudulently overvalue property offered as security for a loan from

the said bank; or

(c) give out or furnish false or willful misrepresentation of material

facts for the purpose of obtaining, renewing, or increasing a loan or
extending the period thereof; or

(d) attempt to defraud the said bank in the event of court action to
recover a loan; or

(e) offer any officer, employee or agent of a Rural Bank a gift, fee,
commission or other form of compensation in order to influence such
bank personnel into approving a loan application; or

(f) dispose or encumber the property or the crops offered as security

for the loan.

3. Any examiner, or officer or employee of the Central Bank of the

Philippines or of department, bureau, office, branch or agency of the
Government who is assigned to examine, supervise, assist or rendered
technical service to Rural Banks and who shall commit any of the acts
enumerated in paragraph one of this section or connive ord in the
commission of the same.

Sec. 23. Any justice of the peace or register of deeds who shall
demand or accept, directly or indirectly, any gift, fee, commission or
other form of compensation in connection with the service required to
be performed by said justice of the peace as provided in section
seventeen and by said register of deeds as provided in section eighteen
of this Act, shall be punished by a fine of not more than one thousand
pesos or by imprisonment for not more than one year, or both, at the
discretion of the court.

Sec. 24. Any bank not organized under this Act and any person,
association, or corporation doing the business of banking, not
authorized under this Act which shall use the words "Rural Bank" as
part of the name or title of such bank or of such person, association,
or corporation, shall be punished by a fine of not less than fifty pesos
for each day during which said words are so used.

Sec. 25. The Monetary Board of the Central Bank shall submit a
report to the Congress on or before the end of each calendar year of XIV.ASSIGNMENT
all the rules and regulations promulgated by it in accordance with the
provisions of this Act, as well as its other actuations in connection with 1.Definitionand nature of assignment
Rural Banks, together with an explanation of its reasons therefor.
2. Perfection by mere consent
Article 1624. An assignment of creditors and other incorporeal rights
shall be perfected in accordance with the provisions of article 1475
3.But must be in public Instrument to affect third parties
Article 1625. An assignment of a credit, right or action shall produce
no effect as against third persons, unless it appears in a public
instrument, or the instrument is recorded in the Registry of Property in
case the assignment involves real property
4.Effects of Assignment
Article 1626. The debtor who, before having knowledge of the
assignment, pays his creditor shall be released from the obligation.
(1527)
Article 1627. The assignment of a credit includes all the accessory
rights, such as a guaranty, mortgage, pledge or preference.
5.Warranties of assignor
Article 1628. The vendor in good faith shall be responsible for the
existence and legality of the credit at the time of the sale, unless it
should have been sold as doubtful; but not for the solvency of the
debtor, unless it has been so expressly stipulated or unless the
insolvency was prior to the sale and of common knowledge.
Even in these cases he shall only be liable for the price received and for
the expenses specified in No. 1 of article 1616.
The vendor in bad faith shall always be answerable for the payment of
all expenses, and for damages.
5.Right of repurchase on assignment credit under litigation
ARTICLE 1634. When a credit or other incorporeal right in litigation is
sold, the debtor shall have a right to extinguish it by reimbursing the
assignee for the price the latter paid therefor, the judicial costs incurred
by him, and the interest on the price from the day on which the same
was paid.
A credit or other incorporeal right shall be considered in litigation from
the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the
assignee demands payment from him. (1535)
Article 1635. From the provisions of the preceding article shall be
excepted the assignments or sales made:
(1) To a co-heir or co-owner of the right assigned;
(2) To a creditor in payment of his credit;
(3) To the possessor of a tenement or piece of land which is subject to
the right in litigation assigned.
7.Subrogation vs. assignment Credit
Article 1301. Conventional subrogation of a third person requires the
consent of the original parties and of the third person
8.Assignment of copyright-Intellectual property Code
Section 180. Rights of Assignee. - 180.1. The copyright may be
assigned in whole or in part. Within the scope of the assignment, the
assignee is entitled to all the rights and remedies which the assignor had
with respect to the copyright.
180.2. The copyright is not deemed assigned inter vivos in whole or in
part unless there is a written indication of such intention.
180.3. The submission of a literary, photographic or artistic work to a
newspaper, magazine or periodical for publication shall constitute only
a license to make a single publication unless a greater right is expressly
granted. If two (2) or more persons jointly own a copyright or any part
thereof, neither of the owners shall be entitled to grant licenses without
the prior written consent of the other owner or owners. (Sec. 15, P.D.
No. 49a)
XV.BULK SALES
ACT No. 3952
THE BULK SALES LAW (as amended)
AN ACT TO REGULATE THE SALE, TRANSFER, MORTGAGE OR
ASSIGNMENT OF GOODS, WARES, MERCHANDISE,
PROVISIONS OR MATERIALS, IN BULK, AND PRESCRIBING
PENALTIES FOR THE VIOLATION OF THE PROVISIONS
THEREOF
Section 1. This Act shall be known as "The Bulk Sales Law."
Sec. 2. Sale and transfer in bulk. Any sale, transfer, mortgage or
assignment of a stock of goods, wares, merchandise, provisions, or
materials otherwise than in the ordinary course of trade and the regular
prosecution of the business of the vendor, mortgagor, transferor, or
assignor, or sale, transfer, mortgage or assignment of all, or
substantially all, of the business or trade theretofore conducted by the
vendor, mortgagor, transferor, or assignor, or of all, or substantially all,
of the fixtures and equipment used in and about the business of the
vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale
and transfer in bulk, in contemplation of this Act: Provided, however,
That if such vendor, mortgagor, transferor or assignor, produces and
delivers a written waiver of the provisions of this Act from his creditors
as shown by verified statements, then, and in that case, the provisions
of this section shall not apply.
Sec. 3. Statement of creditors. It shall be the duty of every person
who shall sell, mortgage, transfer, or assign any stock of goods, wares,
merchandise, provisions or materials in bulk, for cash or on credit,
before receiving from the vendee, mortgagee, or his, or its agent or
representative any part of the purchase price thereof, or any promissory
note, memorandum, or other evidence therefor, to deliver to such
vendee, mortgagee, or agent, or if the vendee, mortgagee, or agent be
a corporation, then to the president, vice-president, treasurer, secretary
or manager of said corporation, or, if such vendee or mortgagee be a
partnership firm, then to a member thereof, a written statement, sworn
to substantially as hereinafter provided, of the names and addresses of
all creditors to whom said vendor or mortgagor may be indebted,
together with the amount of indebtedness due or owing, or to become
due or owing by said vendor or mortgagor to each of said creditors,
which statement shall be verified by an oath to the following effect:
PHILIPPINE ISLANDS
PROVINCE OR CITY OF _________________}
Before me, the undersigned authority, personally appeared
__________________ (vendor, mortgagor, agent or
representative, as the case may be), bearing cedula No.
____________ issued at ___________ on the day of
_____________ who, by me being first duly sworn, upon his
oath, deposes and states that the foregoing statement
contains the names of all of the creditors of
________________ (vendor, or mortgagor) together with
their addresses, and that the amount set opposite each of said
respective names, is the amount now due and owing, and
which shall become due and owing by _____________
(vendor or mortgagor) to such creditors, and that there are
no creditors holding claims due or which shall become due,
for or on account of goods, wares, merchandise, provisions or
materials purchased upon credit or on account of money
borrowed, to carry on the business of which said goods,
wares, merchandise, provisions or materials are a part, other
than as set forth in said statement.
______________________
Subscribed and sworn to before me this _______ day of
______, 19___, at ________
Sec. 4. Fraudulent and void sale, transfer or mortgage.
Whenever any person shall sell, mortgage, transfer, or assign any stock
of goods, wares, merchandise, provisions or materials, in bulk, for cash
or on credit, and shall receive any part of the purchase price, or any
promissory note, or other evidence of indebtedness for said purchase
price or advance upon mortgage, without having first delivered to the
vendee or mortgagee or to his or its agent or representative, the sworn
statement provided for in section three hereof, and without applying the
purchase or mortgage money of the said property to the pro rata
payment of the bona fide claim or claims of the creditors of the vendor
or mortgagor, as shown upon such sworn statement, he shall be deemed
to have violated this Act, and any such sale, transfer or mortgage shall
be fraudulent and void.
Sec. 5. Inventory. It shall be the duty of every vendor, transferor,
mortgagor, or assignor, at least ten days before the sale, transfer or
execution of a mortgage upon any stock of goods, wares, merchandise,
provisions or materials, in bulk, to make a full detailed inventory thereof
and to preserve the same showing the quantity and, so far as is possible
with the exercise of reasonable diligence, the cost price to the vendor,
transferor, mortgagor or assignor of each article to be included in the
sale, transfer or mortgage, and notify every creditor whose name and
address is set forth in the verified statement of the vendor, transferor,
mortgagor, or assignor, at least ten days before transferring possession
thereof, personally or by registered mail, of the price, terms conditions
of the sale, transfer, mortgage, or assignment.
Sec. 6. Any vendor, transferor, mortgagor or assignor of any stock of
goods, wares, merchandise, provisions or materials, in bulk, or any
person acting for, or on behalf of any such vendor, transferor,
mortgagor, or assignor, who shall knowingly or willfully make, or deliver
or cause to be made or delivered, a statement, as provided for in section
three hereof, which shall not include the names of all such creditors,
with the correct amount due and to become due to each of them, or
shall contain any false or untrue statement, shall be deemed to have
violated the provisions of this Act.
Sec. 7. It shall be unlawful for any person, firm or corporation, as owner
of any stock of goods, wares, merchandise, provisions or materials, in
bulk, to transfer title to the same without consideration or for a nominal
consideration only.
Sec. 8. Nothing in this Act contained shall apply to executors,
administrators, receivers, assignees in insolvency, or public officers,
acting under judicial process.
Sec. 9. The sworn statement containing the names and addresses of all
creditors of the vendor or mortgagor provided for in section three of this
Act, shall be registered in the Bureau of Commerce. For the registration
of each such sworn statement a fee of five pesos shall be charged to
the vendor or mortgagor of the stock of goods, wares, merchandise,
provisions or materials, in bulk.
Sec. 10. The provisions of this Act shall be administered by the Director
of the Bureau of Commerce and Industry, who is hereby empowered,
with the approval of the Department Head, to prescribe and adopt from
time to time such rules and regulations as may be deemed necessary
for the proper and efficient enforcement of the provisions of this Act.
Sec. 11. Any person violating any provision of this Act shall, upon
conviction thereof, be punished by imprisonment not less than six
months, nor more than five years, or fined in sum not exceeding five
thousand pesos, or both such imprisonment and fine, in the discretion
of the court.
Sec. 12. This Act shall take effect on its approval.
Approved: 01 December 1972
XVI.RETAIL TRADE LIBERALIZATION ACT OF 2000 and
RELATED PROVISIONS OF ANTI-DUMMY LAW
REPUBLIC ACT NO. 8762
AN ACT LIBERALIZING THE RETAIL TRADE BUSINESS,
REPEALING FOR THE PURPOSE REALING FOR THE PURPOSE
REPUBLIC ACT NO. 1180, AS AMENDED, AND FOR OTHER
PURPOSES
Be it enacted by the Senate and House of Representatives of the
Philippines of Representatives of the Philippines in Congress assembled:
Section 1. Title This Act shall be known as the "Retail Trade
Liberalization Act of 2000."
Section 2. Declaration of Policy. It is the policy of the State to
promote consumer welfare in attracting promoting and welcoming
productive investment that will bring down price for the Filipino
consumer, create more jobs, promote tourism, assist small
manufacturers, stimulate economic growth and enable Philippine goods
and services to become globally competitive through the liberalization
of the retail trade sector.
Pursuant to this policy, the Philippine retail industry is hereby liberalized
to encourage Filipino and competitive retail trade sector in the interest
of empower the Filipino consumer through lower prices, higher quality
goods, better services and wider choices.
Section 3. Definition. - As used in this Act.
(1) "Retail trade" shall mean any act, occupation or calling of
habitually selling direct to the general public merchandise,
commodities or good for consumption, but the restriction of
this law shall not apply to the following:
(a) Sales by manufacturer, processor, laborer, or
worker, to the general public the products
manufactured, processed or products by him if his
capital dose not exceed One hundred thousand
pesos(100,000.00);
(b) Sales by a farmer or agriculturist selling the
products of his farm;
(c) Sales in restaurant operations by a hotel owner
or inn-keeper irrespective of the amount capital:
provided, that the restaurant is incidental to the
hotel business; and
(d) Sales which are limited only to products
manufactured, processed or assembled by a
manufactured, processed or assembled by a
manufacturer though a single outlet, irrespective of
capitalization.
(2) "High-end or luxury goods" shall refer to goods which are
not necessary for life maintenance and whose demand is
generated in large part by the higher income groups. Luxury
goods shall include, but are not limited to products such as;
jewelry, branded or designer clothing and footwear, wearing
apparel, leisure and sporting goods, electronics and other
personal effects.
Section 4. Treatment of Natural Born Citizen Who Has Lost His
Philippine Citizenship. - A natural-born citizen of the Philippines who
resides in the Philippines shall be granted the same rights as Filipino
citizens for purposes of this Act.
Section 5. Foreign Equity Participation. - Foreign-owned partnerships,
associations and corporation formed and organized under the laws of
the Philippines may, upon registration with the Securities and Exchange
Commission (SEC) and the Department of Trade and Industry (DTI), or
in case of foreign owned single proprietorships, with the DTI, Engage or
invest in the retail trade business, subject to the following categories.
Category A Enterprises with paid-up capital of
the equivalent in Philippine Peso of the than Two
million five hundred thousand US dollars
(US$2,500,000.00) shall be reserved exclusively for
Filipino citizens and corporations wholly owned by
Filipino citizens.
Category B Enterprises with a minimum paid-up
capital of the equivalent in Philippine Pesos of two
million five hundred thousand US dollar
(US$2,500,000.00) but less than Seven million five
hundred thousand US dollars (US$7,500,000.00)
may be wholly owned by foreigners except for the
first two (2) years after the effectivity of this Act
 wherein foreign participation shall be limited to not
more than sixty percent (60%) of total equity.
Category C Enterprises with a paid-up capital of
the equivalent in Philippine Pesos of Seven million
five hundred thousand US dollars
(US$7,500,000.00), or more may be wholly owned
by foreigners: Provided, however, That in no case
shall the investments for establishing a store in
vestments for establishing a store in Categories B
and C be less than the equivalent in Philippine
pesos of Eight hundred thirty thousand US dollars
(US$830,000.00).
Category D Enterprises specializing in high-end
or luxury products with a paid-up capital of the
equivalent in Philippine Pesos of Two hundred fifty
thousand US dollars (US$250,000.00) per store
may be wholly owned by foreigners.
The foreign investor shall be required to maintain in the Philippines the
full amount of the prescribed minimum capital unless the foreign
investor has notified the SEC and the DTI of its intention to repatriate
its capital and cease operations in the Philippines. The actual use in
Philippine operations of the inwardly remitted minimum capital
requirement shall be monitored by the SEC.
Failure to maintain the full amount of the prescribed minimum capital
prior to notification of the SEC and the DTI, shall subject the foreign
investor to penalties or restrictions on any future trading
activities/business in the Philippines.
Foreign retail stores shall secure a certification from the Bangko Sentral
ng Pilipinas (BSP) and the DTI, which will verify or confirm inward
remittance of the minimum required capital investments.
Section 6. Foreign Investors Acquiring Shares of Stock of Local
Retailers. - Foreign investors acquiring shares from existing retail stores
whether or not publicly listed whose net worth is in the excess of the
peso equivalent of Two million five hundred thousand US dollars
(US$2,500,000.00) may purchase only up to a maximum of sixty percent
(60%) of the equity thereof within the first two (2) years from the
effectivity of this Act and thereafter, they may acquire the remaining
percentage consistent with the allowable foreign participation as herein
provided.
Section 7. Public Offering of Shares of Stock. All retail trade
enterprises under Categories B and C in which foreign ownership
exceeds eighty percent (80%) of equity shall offer a minimum of thirty
percent (30%) of their equity to the public through any stock exchange
in the Philippine within eight (8) years from their start of operations.
Section 8. Qualification of Foreign Retailers. - No foreign retailer shall
be allowed to engage in retail trade in the Philippine unless all the
following qualifications are met:
(a) A minimum of Two hundred million US dollar
(US$200,000,000.00) net worth in its parent corporation for
Categories B and C, and Fifty million US dollar
(US$50,000,000.00) net worth in its parent corporation for
category D;
(b) (5) retailing branches or franchises in operation anywhere
around the word unless such retailer has at least one (1) store
capitalized at a minimum of Twenty-five million US dollars
(US$25,000,000.00);
(c) Five (5)-year track record in retailing; and
(d) Only nationals from, or juridical entities formed or
incorporated in Countries which allow the entry of Filipino
retailers shall be allowed to engage in retail trade in the
Philippines.
The DTI is hereby authorized to pre-qualify all foreign retailers, subject
to the provisions of this Act, before they are allowed to conduct business
in the Philippine.
The DTI shall keep a record of Qualified foreign retailers who may, upon
compliance with law, establish retail stores in the Philippine. It shall
ensure that parent retail trading company of the foreign investor
complies with the qualifications on capitalization and track record
prescribed in this section
The Inter- Agency Committee on Tariff and Related Matters Authority
(NEDA) Board shall formulate and regularly update a list of foreign
retailers of high-end or luxury goods and render an annual report on the
same to Congress.
Section 9. Promotion of Locally Manufactured Products. - For ten (10)
year after the effectivity of this Act, at least thirty percent (30%) of the
aggregate cost of the stock inventory of foreign retailers falling under
Categories B and C and ten percent (10%) for category D shall be made
in the Philippines.
Section 10. Prohibited Activities of Qualified Foreign Retailers.
Qualified foreign retailers shall not be allowed to engage in certain
retailing activities outside their accredited stores through the use of
mobile or rolling stores or carts, the use of sales representatives, door-
to-door selling, restaurants and sari-sari stores and such other similar
retailing activities: Provided, That a detailed list of prohibited activities
shall hereafter be formulated by the DTI
Section 11. Implementing Agency: Rule and Regulations. The
monitoring and regulation of foreign sole proprietorships, partnerships,
associations or corporations allowed to engage in retail trade shall be
the responsibility of the DTI. This shall include resolution of conflicts.
The DTI, in coordination with the SEC, the NEDA and the BSP, shall
formulate and issue the implementing rules and regulation necessary to
implement this Act within ninety (90) days after its approval.
Section 12. Penalty Clause. - Any person who shall be Found guilty of
Violation of any provision of this Act shall be punished by imprisonment
of not less that six (2) years and one (1) day but not more than eight
(8) years, and a fine of not less than One million pesos
(P1,000,000.00) but not more that Twenty million pesos
(P20,000,000.00) In the case of associations, partnerships or
corporations, the penalty shall be imposed upon its partners, president,
directors, manager and other officers responsible for the violation. If the
offender is not a citizen of the Philippines he shall be deported
immediately after service of sentence. If the Filipino of fender is a public
officer or employee, he shall, in addition to the penalty prescribed
herein, suffer dismissal and permanent disqualification from public office
Section 13. Repealing Clause. Republic Act No. 1180, as amended,
is hereby repealed. Republic Act No. 3018, as amended, and all other
laws, executive orders, rules and regulations or parts thereof
inconsistent with this Act are repealed or modified accordingly.
Section 14. Separability Clause. If any provisions of this Act shall be
held unconstitutional, the other provisions not otherwise affected
thereby shall remain in force and effect.
Section 15. Effectivity. This act shall take effect fifteen (150 days
after its approval and publication in at least two (2) newspapers of
general circulation in the Philippines.
Approved: March 07, 2000
Anti dummy law overview
The Anti-Dummy Law prohibits dummy, or using what I call a proxy
arrangement to accomplish a transaction not allowed under Philippine
law.
To get around the Philippine land ownership rules for example, non-
citizens may arrange for a Filipino citizen to purchase land and register
the land title to the Filipino citizens name, but with the agreement that
the whole right to the land belongs to the foreigner. In this case, the
Filipino citizen is the proxy, thus the dummy arrangement. Another
common approach, is to create a corporation. The problem with using a
corporation to avoid the land restrictions rules, is the 40-60 ratio that
applies (40% foreign ownership, 60% Filipino ownership). Therefore a
variety of side agreements are used to keep control of the corporation
in the hands of the foreigner.
Again, The Anti-Dummy Law prohibits an arrangement usually done by
a foreigner to evade nationality restrictions. If youre caught violating
the Anti-Dummy Law, you can receive a jail sentence for up to 5-15
years or receive a hefty fine. Non-Citizens and Filipino citizens who
engaged in the dummy arrangement will both be held liable.